1. Service tax demand issued against an appellant based on mismatches between income tax records and service tax returns, invoking extended limitation periods. (Para 1 , 7 )
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2026 Supreme(Online)(CESTAT) 3894
THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, KOLKATA EASTERN ZONAL BENCH : KOLKATA REGIONAL BENCH - COURT NO.2
R. Muralidhar, Judicial Member
M. Service Automobile – Appellant
Versus
Commissioner, CGST & CX, Patna – Respondent
Final Order No. 76514/2026
Important Points
Service tax demands cannot be sustained solely based on Form-26AS or Income Tax data without independent corroborative evidence of taxable services rendered.
Subject
Tax - Service Tax
Act Referred
Headnote
(A) Service Tax - Demand based on third-party data - Reliance on Form-26AS and Income Tax Returns without independent corroborative evidence is impermissible in law as these documents are not statutory for determining taxable turnover under service tax provisions. (Para 8)
(B) Limitation - Extended Period - When demand is based purely on Income Tax data without proper verification, the extended period of limitation cannot be invoked. (Para 8)
(C) Quantification - Arbitrary allocation - Demand confirmed based on proportionate allocation of income not proposed in the Show Cause Notice is unsustainable. (Para 9)
Issues: Whether a service tax demand based solely on Form-26AS and Income Tax Returns, without corroborative evidence, is sustainable.
(B) Limitation - Extended Period - When demand is based purely on Income Tax data without proper verification, the extended period of limitation cannot be invoked. (Para 8)
(C) Quantification - Arbitrary allocation - Demand confirmed based on proportionate allocation of income not proposed in the Show Cause Notice is unsustainable. (Para 9)
Issues: Whether a service tax demand based solely on Form-26AS and Income Tax Returns, without corroborative evidence, is sustainable.
Legal Category Hierarchy
Advocates:
For the Appellants/Petitioners: H.K. Pandey
For the Respondents: B. Sanfui
For the Appellants/Petitioners: H.K. Pandey
For the Respondents: B. Sanfui
Table of Contents
2. Appellant maintains compliance and regular filings; Revenue contends reconciliation of income tax records justifies the enhanced service tax demand. (Para 2 , 3 , 5 )
3. The court found the initiation of proceedings solely based on income tax records without independent corroboration of taxable services rendered to be legally unsustainable. (Para 7 , 8 )
4. Mere entries in income tax documents or forms are insufficient to establish service tax liability absent corroborative evidence of taxable services provided. (Para 8 )
5. Service tax demand based on income tax records set aside; partial relief granted with liberty to quantify liability based on the normal period of limitation. (Para 9 , 10 , 11 )
6. Does income tax documentation like Form 26AS constitute sufficient evidence to demand service tax?
No. Income tax data cannot, by itself, establish liability under the Finance Act, 1994. Demand must be substantiated by independent or corroborative evidence of taxable services rendered. (Para 8 )
7. Can the extended period of limitation be invoked based solely on discrepancies in third-party income tax data?
No. Invocation of the extended period requires evidence of suppression which cannot be derived from a mechanical reliance on income tax data for a regular registered taxpayer. (Para 2 , 3 , 8 )
8. Is the quantification of demand permissible without basis in the original show cause notice?
No. The court held that tax liability cannot be confirmed through a calculation method or hypothesis that was not proposed or included in the original show cause notice. (Para 9 )
R. MURALIDHAR :
The Appellant is providing ‘Repair and Maintenance’ Services for activities taken up on behalf of M/s. Tata Motors. They were also providing GTA Services. Based on the Form-26AS details and Income Tax Returns, a Show Cause Notice was issued demanding Rs.85,96,209/- for the services rendered during the period 2012-13 to 2017-18. This Show Cause Notice was issued on 27.04.2018 by invoking the extended period provisions. After due process, the Adjudicating authority confirmed the demand. The Appellants filed their Appeal before the Commissioner(Appeals) wherein they have showed details of activities undertaken by them. After noting that the Appellant has provided GTA Services to BPCL all the data has been incorporated in the Profit & Loss Account and Balance Sheet, the Commissioner(Appeals) has gone into the detailed factual and has dropped down the confirmed demand to Rs.12,32,030/-. He has also modified the demand for the period 2017-18 to Rs.2,01,232/-. Being aggrieved, the Appellant is before the Tribunal. There is no appeal by the Revenue against the dropping of the part of the demand by the Commissioner (Appeals).
2. The Ld.Counsel, appearing on behalf of the Appellant submits that the Appellant is duly registered with the Department and has been filing the monthly Returns. In spite of the monthly Returns being filed the Revenue has relied on third party data like Form-26AS and Income Tax Returns to issue a Show Cause Notice by invoking the extended period provisions. He submits that since the Appellant is a normal registered person and has been filing the Returns there cannot be any allegation of suppression on their part. He draws the attention of the Bench that while Show Cause Notice was issued demanding over Rs.85.00 Lakhs, the Commissioner(Appeals) has dropped down the same to Rs. 12,32,030/- after verifying most of the factual details. However, he has failed to give proper reason for confirming the balance amount also. In respect of 2017-18, it is submitted that the Commissioner(Appeals) has erred in taking the totally different view to proportionately allocate the income for the first three months of the year to confirm the demand of Rs.2,01,232/- for this period, which was not even part of the Show Cause Notice.
3. Further, he takes the stand that the extended period provisions cannot be applied in this case since all the data has been gathered from Profit & Loss Account and Appellant has been a regular registered entity under Service Tax.
4. In view of the above, he prays that the Appeal may be allowed.
5. The Ld.AR for the Revenue reiterates the findings of the lower authorities. He submits that Commissioner(Appeals) has made lot of efforts to reconcile the statement given by the Appellant and brought down the demand to Rs.12,32,030/-. Hence, he justifies the confirmed demand.
6. Heard both sides and perused the appeal papers and other documents placed before me.
7. Admittedly, the Appellant is registered with the Department holding Service Tax Registration No.AITPK9196LSD003. As they have been providing services to M/s. Tata Motors, they were paying Service Tax and filing their Returns. The Department has issued the Show Cause Notice based on the mis-match between the Form-26AS, Income Tax Return and Service Tax Return. Initially a huge demand of Rs.85,96,209/- was made for the period 2012-13 to 2017-18 by invoking the extended period provisions. The same was also confirmed by the Adjudicating authority without going into the factual details. Finally it was up to the Commissioner(Appeals) to go through the factual details and bring down the demand to Rs.12,32,030/-. I also notice that in respect of the dropped portion of demand of over Rs.70.00 Lakhs, the Revenue is not in appeal in spite of the amount being more than the threshold limit specified under the National Litigation Policy (NLP). This shows that the Department has issued the initial SCN without any proper ver
