2026 Supreme(Gau) 1061

IN THE GAUHATI HIGH COURT HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH) RINCIPAL SEAT
SOUMITRA SAIKIA, J.
Sri Samujjal Phukan - Petitioner
Versus
Union of India Represented by Secretary to the Government of India, Ministry of Finance, Department of Revenue – Respondent 
W.P(C) NO. 5236 of 2022
Decided On : 21-04-2026

Service tax cannot be levied on exempted services using assumptions, and the extended period of limitation is inapplicable without an explicit, proven finding of willful suppression or intent to evade tax by the assessee.

Headnote:(A) Finance Act, 1994 - Sections 66, 66B, 66D, 67, 68, 69, 70, 73, 75, 77 and 78 - Service Tax - Liability to pay - Transportation of goods - Exemption under negative list - Demand of service tax based on external financial statements - Invocation of extended period of limitation to recover tax - Whether sustainable.

(B) Taxability of services - Burden of proof - Revenue cannot impose tax by way of inference, analogy, or mere reliance on third-party financial declarations without examining the actual nature of services - If services fall within the negative list, they are excluded from the tax net; liability must be fixed by the statute and not by administrative presumption. (Paras 37, 38, 58)

(C) Extended period of limitation - Pre-conditions for invocation - Extended period under the proviso to the recovery section can only be invoked upon a conclusive finding of fraud, collusion, willful misstatement, suppression of facts, or contravention of provisions with intent to evade duty - Mere omission or non-furnishing of information does not suffice; there must be a positive finding of willful intent. (Paras 44, 46, 69)

(D) Article 226 of the Constitution of India - Availability of alternative remedy - While statutory remedies should generally be exhausted, a high court may invoke extraordinary jurisdiction where the impugned action is wholly without jurisdiction, violates natural justice, or is based on an interpretation of law that is manifestly arbitrary and results in a nullity. (Paras 60, 66, 72)

Facts of the case:
The authorities issued a show cause notice for non-payment of service tax for the period 2014-15 to 2017-18, relying solely on third-party financial data (Form 26AS) to allege suppression of taxable income. The assessee contended that their business of transporting goods by road was exempted under the negative list provisions. The assessing authority confirmed the demand and invoked the extended period of limitation without a specific finding regarding willful intent or fraud, leading the assessee to challenge the order directly via a petition under Article 226.

Findings of Court:
The court found that the authorities failed to establish whether the services rendered were taxable at all in light of the negative list exemption. The assessment was based on inferences rather than legal evidence. Furthermore, the authorities failed to satisfy the legal prerequisites for invoking the extended period of limitation, as there was no evidence of willful suppression or deliberate intent to evade taxes.

Issues: Whether the demand of service tax on transportation services is valid given the negative list status and whether the Revenue had sufficient grounds to invoke the extended period of limitation for recovery of tax.

Ratio Decidendi: Taxation cannot be imposed or assumed based on mere analogy or external financial data without establishing the liability under the statute. The invocation of the extended period of limitation requires a specific, conscious finding of willful misconduct by the assessee; in the absence of such findings, the assumption of jurisdiction by the revenue authorities beyond the normal period of limitation is illegal and unenforceable.

Result: Petition allowed. The impugned demand and the order-in-original are set aside.