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2026 Supreme(Online)(CESTAT) 497
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
K. Anpazhakan, Member (Technical)
Anup Kumar Metya – Appellant
Versus
Commissioner of C.G.S.T. & C.X. – Respondent
Service Tax Appeal No. 76374 of 2024
For the Appellants/Petitioners: Aditya Dutta
For the Respondents: S.K. Jha
A service tax demand cannot be sustained if it is based solely on third-party Income Tax data (Form 26AS) without independent verification by the Revenue to establish the nature of the services rendered, nor can it be raised using repealed classification provisions after the advent of the Negative List.
Headnote:(A) Finance Act, 1994 - Sections 65(19), 65(105)(zzb), 66B, 66D - Service Tax - Demand based on Income Tax data/Form 26AS - Requirement of independent verification - Tribunal held that demand raised solely on the basis of comparison between Income Tax returns and Balance Sheet without independent enquiry to establish the nature of services rendered is not sustainable.
(B) Negative List Regime - Classification of services - Demand for period post 30.06.2012 under erstwhile provisions of Finance Act, 1994 - Failure to invoke correct statutory provisions - Show Cause Notice demanding service tax under specific categories after the transition to the negative list regime without invoking relevant provisions is legally unsustainable.
Facts of the case:
The appeal was filed against an order confirming a demand for service tax, interest, and penalties for the period 2014-15 to 2016-17. The department had issued a Show Cause Notice based solely on a comparison of Income Tax Returns/Form 26AS with the appellant's Balance Sheet and Profit & Loss Account, without conducting independent investigation into the actual services rendered or invoking appropriate statutes for the period.
Findings of Court:
The Tribunal found that the department failed to conduct any independent verification or bring corroborative evidence. Furthermore, the reliance on erstwhile classification provisions for a period under the Negative List regime without invoking the correct charging sections rendered the demand invalid.
Issues: Whether a service tax demand is sustainable when based exclusively on Income Tax data without independent verification and whether a demand invoking erstwhile classification provisions for a period post-30.06.2012 is legally valid.
Ratio Decidendi: Mere reliance on third-party data from the Income Tax department does not establish tax liability under the Finance Act, 1994, which requires proof of rendition of taxable services. Mechanical reliance on income tax data is impermissible in law.
Result: Appeal allowed.
| Table of Content |
|---|
| 1. summary of facts and lower authority proceedings. (Para 1 , 2 , 3) |
| 2. challenges regarding independent inquiry and statutory applicability. (Para 4 , 5) |
| 3. requirement of independent verification for tax demands. (Para 6 , 7) |
| 4. incorrect invocation of provisions post-negative list regime. (Para 8) |
| 5. final setting aside of demand due to legal unsustainability. (Para 9 , 10) |
ORDER:
The instant appeal has been filed by Shri Anup Kumar Metya, Vill & PO: Srirampur, P.S. Tamluk, Purba Medinipur, West Bengal – 721 651 [hereinafter referred to as the “appellant”] against the Order-in-Appeal No. 291/HAL/ST/2024-25 dated 12.08.2024 whereby the demand of Service Tax, along with interest and penalties, as confirmed in the Order-in-Original No. 64/AC/Haldia-II/ADJN/2023-24 dated 01.06.2023, has been upheld.
2. The facts of the case are that a Show Cause Notice dated 10.09.2020 was issued to the appellant on the basis of verification of the Income Tax Returns / Form 26AS received from the Income Tax Department vis-à-vis Balance Sheet and Profit & Loss Account submitted by the appellant pertaining to the period from 2014-15 to 2016-17. It was noticed by the Revenue that the appellant had not paid Service Tax amounting to Rs.5,19,009/- (inclusive of cess) under the category of “business auxiliary service” as defined under erstwhile Section 65(19) of the Finance Act, 1994 read with erstwhile Section 65(105)(zzb) of the Finance Act, 1994. Accordingly, the said Notice proposed the demand and recovery of Service Tax to the tune of Rs.5,19,009/- from the appellant-noticee, along with interest and penalties thereon.
3. The above Notice was adjudicated by the Ld. Deputy Commissioner (P&V), Central Tax & C.X., Haldia Commissionerate, Kolkata vide the Order-in-Original No. 64/AC/Haldia-II/ADJN/2023-24 dated 01.06.2023 wherein the ld. adjudicating authority has confirmed the demand of Service Tax to the extent of Rs.4,93,426/- (inclusive of cess), along with interest. The ld. adjudicating authority also imposed a penalty equivalent to the amount of tax demanded, as above, under Section 78(1) of the Finance Act, 1994 along with a penalty of Rs.10,000/- under Section 77 of the Finance Act, 1994 read with Section 174 (2) of the Central Goods & Service Tax Act, 2017.
3.1. On appeal, the Ld. Commissioner (Appeals), vide the order impugned herein, has upheld the demand of Service Tax, along with interest and penalties, as confirmed in the Order-in-Original dated 01.06.2023.
3.2. Aggrieved by the confirmation of the above demand of Service Tax, along with interest and penalties, the appellant has filed the present appeal.
4. The Ld. Counsel appearing on behalf of the appellant submits that instant Show Cause Notice has been issued by comparison of third-party data received from the Income Tax Department along with the Balance Sheet and Profit & Loss Account of the appellant. He further submits that for raising the impugned demand, no independent verification has been conducted by the Revenue so as to ascertain the nature of service rendered by the appellant and the liability to Service Tax on the part of the appellant, if any, for such services rendered; no independent investigation has been conducted by the Department at the service receiver’s end either. Accordingly, it is his contention that the entire demand raised and confirmed against the appellant in the present case by solely relying on CBDT data and without conducting any investigation to establish the taxability of the said services, cannot be sustained, as has been held by this Tribunal in a catena of decisions on the issue.
4.1. The Ld. Counsel for the appellant also submitted that in the present proceedings, Service Tax has been demanded from them under the category of “business auxiliary service” as defined under erstwhile Section 65(19) of the Finance Act, 1994 read with erstwhile Section 65(105)(zzb) of the Finance Act, 1994. He points out that the demand raised in this case is
