Holding

Show‑cause notices issued under section 73 of the Finance Act, 1994 to service availers for periods before 2003 are not maintainable.

Summary

The respondents, Gujarat Carbon & Industries Ltd., had hired transport operators before 2003 and were served with a notice demanding service tax on the gross transport charges. The Commissioner of Central Excise relied on sections 70, 73, 76, 77 and 81 of the Finance Act, 1994 and on a retrospective amendment under section 117 of the Finance Act, 2000. The Tribunal quashed the demand, holding that service receivers were not required to file returns under section 70 before the introduction of section 71A in the Finance Bill, 2003, and therefore section 73 could not be invoked. The Supreme Court affirmed this view, noting that section 73 applies only to assessees liable to file a return under section 70, a condition not met by the respondents for the period in question. Consequently, the show‑cause notices issued under section 73 were held untenable and the appeals were dismissed.

Issues considered

Whether service tax can be levied on service availers for periods prior to 2003 under the Finance Act, 1994.
Whether section 73 of the Finance Act, 1994 is applicable to persons not liable to file a return under section 70 before the introduction of section 71A.
Effect of the retrospective amendment under section 117 of the Finance Act, 2000 on the liability of service availers.

Legislation cited

Finance Act, 1994s. 70, s. 71-A, s. 73, s. 76, s. 77, s. 81
Finance Act, 2000s. 117
Service Tax Rules, 1994s. Rule 1(1)(d)(xii), s. Rule 1(1)(d)(xvii)

Subjects

service taxservice availersection 73section 70section 71Aretrospective amendmentFinance Act 1994Finance Bill 2003CESTATSupreme Court

Judgment

[2008] 12 S.C.R. 305

>.
' COMMISSIONER OF CENTRAL EXCISE, VADODARA-1
v.
A

MIS GUJARAT CARBON & INDUSTRIES LTD.
(Civil Appeal No.1618 of 2005)
AUGUST
B
18, 2008
[DR. ARIJIT PASAYAT AND DR. MUKUNDAKAM
SHARMA, JJ.]

Service tax - Levy of, on service availers prior to 2003 - c
Held: Rightly set aside by Tribunal - Finance Act, 1994 -
ss. 70, 73, 76, 77 and 81.
· Respondents-assessees had availed the services of
goods transport operators prior to the year 2003. The Com-
D
missioner passed order demanding service tax from Re-
spondents on the gross transport charges paid by them
to the transport operators. The Tribunal quashed the or-
der. Hence the present appeals.

.Ii Dismissing the appeals, the Court E
HELD: The Tribunal referred to a decision in the case
of L.H. Sugar Factories Ltd. v. CCE, Meerut-11* where under
similar circumstances the show cause notice was issued.
It was held that during the relevant period Section 73 takes
in only the case of assessees who are liable to file return F
p~ under Section 70. The liability to file return is cast on the
. assessees only under s.71-A which was introduced in the
Finance Bill, 2003. Thus, during the period in question no
notice could have been issued under Section 73 for non-
filing of return under s.70. According to the Tribunal, the G
service receiver was not required to file any return under
)
s.70 of the Finance Act, 1994 prior to 2003. The Tribunal
accordingly quashed the order demanding service tax
from the respondents-service availers. In an identical cas~
305 H
306 SUPREME COURT REPORTS [2008] 12 S.C.R.

A in CCE, Meerut-11 v. L.H. Sugar Factories Ltd.**, this Court
agreed with similar conclusions of the Tribunal and held
that even the amended s.73 takes in only the case of
assessees who are liable to file return under s.70. (Paras
5, 6, 8] (309-8-D,F,G]
B ** Commissioner of Central Excise, Meerut-11 v. L.H.
Sugar Factories Ltd. and Ors. (2005 (13) SCC 245 - relied
on.
* L.H. Sugar Factories Ltd. v. CCE, Meerut-11 (2004) 165
c ELT 161 - referred to.
Laghu Udyog Bharti and Ors. v. Union of India, 1999
(112) ELT 365 - cited.
Case Law Reference
D (2004) 165 ELT 161 referred to. Para 5 ·
(2005 (13) sec 245 relied on Para a

-
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1618
of 2005
E
From the final Order No. A/909/WZB/2004/C-IV dated 271 '
8/2004 of the Customs, Excise & Service Tax Appellate Tribu-
nal, West Zonal Bench, Mumbai in Appeal No. ST/101/2002-
MUM

F WITH
C.A. Nos. 6424, 7144of2005, 1077, 1173, 3464of2006,
3629, 3565, 3558, 3557, 3556, 3172 of2007 and 5131of2008.
M. Chandrashekhar, S.P. Singh, Ashok Bhan, Shilinder
G Saini, Alka Sharma, B.V. Balaram Das; P. Parmeswaran, B.
Krishna Prasad, S. Nanda Kumar, Satish Kumar, G Ananda
(
Selvam, S. Lakshmi, V.N. Raghupathy, Kavin Gulati, Gaurav
Goel, Mahesh Agarwal, Rishi Agrawala, E.C. Agrawala, U.A.
Rana, Abhishek K. Rao (for MIS. Gagrat & Co.), Sanjeev kumar
H Singh, Ruby 'Singh Ahuja, Manu Aggarwal, Manik Karanjwala
COMM. OF CENTRAL EXCISE, VADODARA-1 v. 307
M/S GUJARAT CARBON & INDU. LTD.
>- )
and Senthil Jagadeesan for the appearing parties. A
The Judgment of the Court was delivered by
Dr. ARIJIT PASAYAT, J.
Civil Appeal No. 5131/2008, D.No.10930/2006
B
1. Delay condoned. Appeal Admitted .
..
" 2. In these appeals common points are involved and
therefore they are disposed of by this common judgment.
3. Challenge in each -case is to the judgment of various c
Benches of Customs, Excise & Service Tax Appellate Tribunal
(in short 'CESTAT'). The respondents in each case had
engaged the services of transport operators. They were in
other words availers of service and not service providers. The
Central Excise Authorities issued notice asking them to explain D
as to why penalty should not be imposed upon them under the
provisions of Sections 76 and 77 of Chapter V of the Finance
Act, 1994 for alleged contravention of the provisions of
Sections 70, 76 and 81 of the said Chapter and as to why
interest should not be recovered from them for delayed
E
payment of service tax as provided under the aforesaid Act.
Relying on a decision of this Court in Laghu Udyog Bharti &
Ors. v. Union of India (1999 (112) ELT 365) the show cause
notice was dropped. In the said case, it was held that service
availers are not required to pay service tax under the provisions
of the Finance Act. In some cases the orders were reviewed F
> 1 under Section 84 of the said Act on the ground that Section
117 of the Finance Act, 2000 validates retrospectively the
provisions of sub-clause (xii) of clause (d) of sub-rule (1) of
Rule 1 of Service Tax Rules, 1994. As a sample case, we
refer to the factual scenario of Civil Appeal No.1618 of 2005. G
The factual scenario is that Commissioner was of the view
) that according to Section 117 of the Finance Act, 2000
notwithstanding anything contained in any judgment, decree
or order of any court, tribunal or other authority , sub-clause
(xii) and sub-clause (xvii) of clause (d) of sub-rule (1) of Rule H
t
>--

308 SUPREME COURT REPORTS [2008] 12 S.C.R.

( ......
A 2 of the Service Tax Rules, 1994 as they stood immediately
before the commencement of the Service Tax (Amendment)
Rules, 1998 shall be deemed to be valid as if the said clause
had been in force at all material times. In view of the aforesaid
retrospective ·amendment, the order of the Deputy
B Commissioner was reviewed. A show cause notice was issued
seeking to review the order. After considering the reply of the
,,;...
respondent-assessee the Commissioner demanded service >-....
f
~
tax on the gross amount of transport charges paid by it to the
goods transport operators excluding insurance charges during
c the period 16.11.1997 to 1.6.1998 alongwith interest for
delayed payment of service tax required to be paid under the
Finance Act, 1994.
4. The Tribunal referred to Section·73 of the Finance Act
which reads as follows:
D
"Section 73 (a)- The Assistant Commissioner of CentraJ
Excise or, as the case may be, the Deputy Commissioner
1·
of Central Excise has reason to believe that by reason of
omission or failure on the part of the assessee to make

E
a return under Section 70 for any prescribed period or to f
disclose wholly or truly all material facts required. for
verification of the assessment under Section 71, the value
of taxable service for that quarter has escaped
assessment or has been under assessed, or any sum
has erroneously been refunded, or
F
(b) notwithstanding that there has been no omission or
failure as mentioned in Clause [a] on the part of the ""'· .(
assessee, the Assistant Commissioner of Central Excise
or, as the case may be Deputy Commissioner of Central
Excise has, in consequence of information in his
G
possession, reason to believe that the value of any taxable
service assessable in any prescribed period has escaped (
assessment or has been under-assessed, or any sum
has errone·ously been refunded, he may; in cases falling
under Clause (a), at any time within five years, and in
H
COMM. OF CENTRAL EXCISE, VADODARA-1 v. 309
(_._ M/S GUJARAT CARBON & INDU. LTD. [DR ARIJIT PASAYAT, J.]
>
cases falling under Clause (b ), at any time within six months A
from the date for filing the return, seNe on the assessee
a notice and proceed to assess or reassess the value of
the taxable seNice."
5. The Tribunal referred to a decision in the case of L.H.
Sugar Factories Ltd. v. CCE, Meerut-11 (2004 (165) ELT 161) B
where under similar circumstances the show cause notice
""
was issued. It was held that during the relevant period Section
73 takes in only the case of assessees who are liable to file
return under Section 70. The liability to file return is cast on
the assessees only under Section 71-A which was introduced c
in the Finance Bill, 2003. Thus, during the period in question
no notice could have been issued under Section 73 for non
filing of return under Section 70. According to the Tribunal, the
seNice receiver was not required to file any return under
Section 70 of the Finance Act, 1994 prior to 2003. The Tribunal D
accordingly quashed the order demanding seNice tax from
the respondents-seNice availers. Similar view has been
expressed in the connected cases.
6. According to learned counsel for the revenue, .the view
of CESTAT is clearly unsustainable, because of retrospective E
operation of the provisions.
7. Learned counsel for the respondents on the other hand
supported the respective judgments of the Tribunal.
j. .t 8. It is to be noted that in an identical case in F
Commissioner of Central Excise, Meerut-11 v. L.H. Sugar
Factories Ltd. and Ors. (2005 (13) SCC 245), this Court
agreed with similar conclusions of the Tribunal. In the said
case, the conclusions of the Tribunal were as follows:
G
"The above would show that even the amended Section
) 73 takes in only the case of assesses who are liable to file
return under Section 70. Admittedly, the liability to file return
is cast on the appellants only under Section 71A. The
class of persons who come under Section 71A is not
H
310 SUPREME COURT REPORTS · [2008] 12 S.C.R.
..
I

( _ '
A brought under the net of Section 73. The above being the
position show cause notices issued to the appellants
invoking section 73 are not maintainable."
9. In view of what has been stated in L.H. Sugar's case
(supra) we do not firid any merit in the present appeals which
B are accordingly dismissed.
':...
B.B.8. Appeals dismissed.

(