Section 73 demand on reverse charge service tax held unsustainable for recipients covered by Section 71A.

Service tax demand on reverse charge basis for clearing and forwarding services was held unsustainable because the recipient fell within the class required to file returns under Section 71A, not Section 70. The Tribunal applied the binding view that Section 73, even as retrospectively amended, did not extend to persons covered by Section 71A, so show cause notices and confirmations issued under Section 73 were not maintainable. The demand was therefore struck down in favour of the assessee.

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Issues: Whether service tax demand raised under Section 73 of the Finance Act, 1994 on reverse charge basis for clearing and forwarding services was sustainable in view of the retrospective amendments introducing Section 71A and extending the demand machinery.

Analysis: The demand related to a period when the recipient of service was required to file returns under Section 71A, while the show cause notice and confirmation of demand proceeded under Section 73. The Tribunal followed the binding view that Section 73, even as retrospectively amended, applied only to persons liable to file returns under Section 70 and did not extend to the class covered by Section 71A. The Supreme Court had affirmed that such show cause notices invoking Section 73 were not maintainable.

Conclusion: The service tax demand was not sustainable and the issue was decided in favour of the assessee.

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