Service tax demand cannot be raised solely based on discrepancies between ST-3 returns and Income Tax records (Form 26AS/ITR) without specific evidence of taxable services, and the extended period of limitation cannot be invoked in such circumstances without proof of intent to evade.

The present appeal is directed against the impugned order dated 28.02.2024 passed by the Commissioner (Appeals) CGST, Chandigarh, whereby the appeal filed by the appellant is rejected and Order-in-Original was upheld.

Briefly the facts of the present are that on the basis of third party data received from the Income Tax Department for the year 2014-2015, it was observed by the Department that there was receipt from the services as per income tax returns but no ST-3 returns filed by the appellant during the said period; accordingly, a show cause notice was issued to the appellant for recovery of service tax amounting to Rs. 19,01,705/- and penalties under Section 77 and 78 of the Act were also proposed to be imposed. The adjudicating authority vide the Order-in-Original dated 18.12.2023 confirmed the demand of Service Tax of Rs. 3,26,785/- along with interest under Section 73 and Section 75 of the Act; penalties of Rs. 10,000 and Rs. 3,26,785/- was also imposed under Section 77 and 78 respectively of the Act and the remaining demand of Rs. 15,74,920/- was dropped by the adjudicating authority. Aggrieved by the said order, the appellant filed the appeal before the Commissioner (Appeals) who rejected the same.

Hence, the present appeal.

Heard both the parties and perused the material on record.

Learned counsel for the appellant submits that the impugned order is not sustainable in law and is liable to be set aside as the same has been passed without properly appreciating the facts and the law. He further submits that it is well established principle that the service tax demand cannot be raised solely on the basis of mismatch between ST-3 returns and Form 26AS/ITR figures. He further submits that in the present case, the department failed to identify specific taxable activity, the service recipients and establish that the differential income reflected in Form 26AS corresponds to any taxable service. Learned counsel refer to CBIC instructions dated 26.10.2021 which has clarified that mere differences between ST-3 returns and Income Tax records cannot be the basis for issuing a demand. He further submits that this issue is no more res integra and has been considered by this Bench of the Tribunal vide its Final Order No. 60621/2025 dated 23.06.2025 in the case of M/s Rakesh Singhal v. Commissioner of Central Excise and ST, Rohtak .

He further submits that this Tribunal has consistently held that the service tax cannot be raised merely on the basis of Form 26AS without collaborative evidence. Learned counsel also submits that in the present case, the Revenue has invoked the extended period of limitation. The period involved in the present case is 2016-17, whereas, the show cause notice was issued on 17.10.2021 under Section 72 (best judgments). The learned counsel further submits that the Department has failed to establish any of the ingredients which are required for invoking the extended period of limitation. He further submits that this issue was also considered by this Bench of the Tribunal in the case of M/s New Prakash Roadways Vs. Commissioner of Central Excise and Service Tax, Rohtak vide Final Order No. 60484/2024 dated 22.08.2024, wherein it has been held that since the appellant provided GTA service where the service recipient is liable to pay service under Reverse Charge Mechanism, and the Department failed to produce evidence showing services to known Reverse Charge Mechanism clients, the benefit of doubt goes to the appellant. He further submits that the appellant had a bonafide belief that the service tax liability either on the consigner or the consignee as the material transported was from the factories in Baddi to dealers PAN India and no service tax was ever collected as the appellant was under a bonafide belief that he is not liable to pay the service tax.

On the other hand, learned authorized representative reiterated the findings of the impugned order and submits that in spite of various le