Service tax liability cannot be imposed before section 71A came into force; demand held unsustainable.

A service recipient cannot be fastened with return-filing or service tax liability under section 71A of the Finance Act, 1994 for a period before that provision came into force. The governing principle is that tax liability and corresponding compliance obligations arise only when the charging or procedural provision is operative during the material period. Applying that settled rule and following L.H. Sugar Factories Ltd., the demand was held unsustainable because the statutory basis for the obligation did not exist at the relevant time.

---

---

Issues: Whether the appellant, as recipient of service, could be fastened with liability to file return and pay service tax under section 71A of the Finance Act, 1994 for a period when that provision had not yet come into force.

Analysis: The relevant period preceded the introduction of section 71A of the Finance Act, 1994. Liability to tax or to file a return cannot be imposed for a period when the charging or compliance provision was not in force. The settled position is that, in the absence of law during the material period, the service recipient cannot be compelled to incur liability. The decision in L.H. Sugar Factories Ltd. was followed to hold that the demand could not be sustained.

Conclusion: The appellant was not liable under section 71A of the Finance Act, 1994 for the period in dispute.

Final Conclusion: The demand was unsustainable and the appeal succeeded.

Ratio Decidendi: Tax liability and corresponding return-filing obligations cannot be imposed for a period prior to the coming into force of the statutory provision creating that liability.

---