A service tax demand cannot be sustained solely on third-party TDS/ITR data discrepancies without independent investigation to prove that reported amounts constitute consideration for taxable services and that there was a willful suppression to evade tax for invoking the extended period of limitation.

Per: AJAY SHARMA

This appeal has been filed by the Appellant challenging the Order-in-Appeal dated 24.07.2025 passed by the Commissioner (Appeals), CGST & Central Excise, Bhopal (M.P.). By the impugned order, the learned Commissioner (Appeals) modified the Order-in-Original by confirming the service tax demand to the extent of Rs.7,67,514/- along with interest and equal penalty, while setting aside the demand of Rs.1,32,133/- along with interest and equal penalty.

2. The facts, briefly stated, are as follows. The Appellant is a registered service tax assessee engaged in the provision of taxable services namely the service relating to security and manpower service and had been discharging its service tax liability under the self-assessment scheme. On verification of third-party data, namely ITR/TDS data for the Financial Year 2016-17, the Revenue initiated an enquiry and formed the view that the Appellant had received a sum of Rs.98,97,671/- towards provision of taxable services, without declaring such consideration in the ST-3 Returns or paying service tax thereon. A Show Cause Notice dated 19.08.2021 was accordingly issued under Section 73 of the Finance Act, 1994, demanding service tax of Rs.14,84,651/- along with interest and penalties. The Adjudicating Authority, vide Order-in-Original dated 28.11.2022, confirmed the said demand.

3. Upon appeal by the Appellant, the Commissioner (Appeals), vide Order-in-Appeal dated 18.01.2024, set aside the Order-in-Original and remanded the matter to the adjudicating authority for fresh adjudication. Pursuant to the remand, the adjudicating authority passed a fresh Order-in-Original dated 10.06.2024, confirming a reduced service tax demand of Rs.8,99,647/- along with interest and penalties under different provisions of statute. The Appellant appealed once again, and the Commissioner (Appeals) passed the impugned order dated 24.07.2025, confirming the demand to the extent of Rs.7,67,514/- and setting aside the remainder.

4. The learned Counsel for the Appellant raised several grounds challenging the confirmation of the demand. The primary contention advanced is that the Revenue invoked the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, solely on the basis of third-party data, namely ITR/TDS statements, without conducting any independent inquiry and without any material on record to establish fraud, wilful suppression, or any positive act of concealment on the part of the Appellant. The learned Authorised Representative for the Revenue supported the findings in the impugned order and prayed for dismissal of the appeal.

5. Having heard the rival submissions and having perused the case records, including the written submissions and case laws placed on record, the following issue arises for determination:

“Whether a demand under Section 73 of the Finance Act, 1994 can be validly raised by invoking the extended period of limitation solely on the basis of third-party TDS/ITR data, in the absence of any independent inquiry or material establishing non-payment of service tax, fraud, or wilful suppression on the part of the Appellant?”

6. Identical issue came up for consideration before a co ordinate bench of the Tribunal in Homeopathic Medical Publishers vs. Commr. CGST & Central Excise, Mumbai; 2025 (12) TMI 1248- CESTAT Mumbai wherein the issue was decided in favour of the assessee therein. The relevant paragraphs of the said decision are as under:-

xxx xxx xxx

5. …..While it could be posited that exclusion and exception could be allowed only upon evidence of eligibility furnished by assessee, it is not in doubt that invoking of section