Pre-amendment service tax recovery under Section 73 could not be used against taxable service recipients outside Section 70 return obligations.

Before the 10.09.2004 amendment, Section 73 of the Finance Act, 1994 could be used only where the person liable to file returns under Section 70 had failed to do so. Recipients of taxable services covered by Section 71A read with Rule 7A of the Service Tax Rules, 1944 were outside that pre-amendment scope. Accordingly, show-cause notices and consequential demands issued before the amendment against such recipients were contrary to law and could not be sustained; the impugned order was set aside.

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Issues: Whether show-cause notices and consequent demands issued prior to 10.09.2004 under Section 73 of the Finance Act, 1994 were valid against recipients of taxable services who were not required to file returns under Section 70 or Section 71A.

Analysis: The Tribunal followed its earlier coordinate-bench view that, before the amendment to Section 73 with effect from 10.09.2004, that provision could be invoked only in cases where the person was liable to file returns under Section 70 and had failed to do so. The respondents, being recipients of taxable services governed by Section 71A read with Rule 7A of the Service Tax Rules, 1944, were outside the pre-amendment reach of Section 73. As the notices and corrigenda in the present matter were issued before the amendment, they were held to be contrary to law. The Tribunal also applied judicial discipline by following the earlier coordinate-bench decision on identical facts.

Conclusion: The show-cause notices were bad in law and the demand could not be sustained; the impugned order was set aside in favour of the assessee.

Ratio Decidendi: Prior to 10.09.2004, Section 73 of the Finance Act, 1994 did not authorise recovery of service tax from recipients of taxable services who were not required to file returns under Section 70, and notices issued to such persons before that amendment were unsustainable.

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