Recipient liability for Goods Transport Operator service tax was unsustainable; demand and notice failed under the governing statutory framework.

Service tax could not be fastened on the recipient of Goods Transport Operator services for the relevant period because the charging and machinery provisions did not authorise shifting liability to the recipient, and the rule provisions treating the recipient as tax collector were inconsistent with the Act and ultra vires. Earlier binding precedents were followed, and the validating amendments in the Finance Act, 2000 did not alter that result on the material before the Tribunal. The demand and show-cause notice were therefore unsustainable, and the amount already deposited was directed to be refundable subject to verification of arithmetical accuracy.

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Issues: Whether service tax could be fastened on the recipient of Goods Transport Operator services for the relevant period and whether the demand and show-cause notice were sustainable in law.

Analysis: The levy on GTO services was introduced through the service tax framework and the impugned rules sought to treat the recipient as the person responsible for collecting tax. The earlier binding decisions held that, for the relevant period, the charging and machinery provisions did not authorise fastening liability on the recipient of such services, and the corresponding rule provisions were inconsistent with the Act and therefore ultra vires. The subsequent validating amendments in the Finance Act, 2000 were considered, but the issue remained covered by the earlier precedents relied upon by the Tribunal. The demand was thus not sustainable, and the amount already deposited became refundable, subject to verification of arithmetical accuracy.

Conclusion: The demand on the recipient of GTO services was not sustainable. The appeal was allowed and the impugned order was set aside, with consequential relief including refund of the amount already paid, subject to verification.

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