Service tax liability for goods transport operator service could not sustain interest and penalty without a section 70 return-filing obligation.

For the interim period governing goods transport operator service, the recipient was treated as liable only under the later deeming scheme, while the return-filing obligation arose under section 71A rather than section 70 of the Finance Act, 1994. Following earlier decisions and the later Supreme Court ruling on the same point, proceedings under section 73(1)(a) for alleged non-filing of return could not be sustained against a person not bound by section 70 for that period. As the tax had already been paid, interest and penalty were held unsustainable and were set aside.

---

---

Issues: Whether interest and penalty could be sustained on a demand of service tax for goods transport operator service for the interim period when tax had already been paid and the notice was issued under section 73(1)(a) of the Finance Act, 1994.

Analysis: The statutory scheme governing the relevant period treated the recipient of goods transport operator service as liable under the deeming fiction introduced later, while the obligation to file returns was cast only by section 71A of the Finance Act, 1994. The earlier decisions holding that persons covered by section 71A were not within the ambit of section 73 were followed, and the later Supreme Court ruling on the same issue was treated as directly applicable. Since the service receiver had no return-filing obligation under section 70 for that period, proceedings under section 73(1)(a) for non-filing of return could not be sustained.

Conclusion: The demand of interest and penalty was not sustainable and was set aside in favour of the assessee.

---