Form 26AS mismatch cannot by itself prove service tax liability; limitation and reverse charge objections also defeated the demand.

Service tax liability could not be sustained merely on Form 26AS mismatch without independent evidence of a taxable service, and reverse charge could not be applied to recipients outside the notified category. The reconciliation of ST-3 returns and Form 26AS indicated that the higher Form 26AS figures arose from TDS deduction on rent or commission and on the service tax component, supported by recipient certificates. The demand was also time-barred, as part of it fell beyond five years, the department had already scrutinised the returns and Form 26AS, no suppression or mala fide intent was shown, and the reverse charge component was revenue neutral.

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Issues: (i) Whether service tax demand could be sustained on the basis of Form 26AS mismatch and reverse charge allegations. (ii) Whether the demand was barred by limitation and whether extended period could be invoked.

Issue (i): Whether service tax demand could be sustained on the basis of Form 26AS mismatch and reverse charge allegations.

Analysis: The reconciliation of ST-3 returns and Form 26AS showed that the higher figure in Form 26AS arose because some recipients deducted TDS on the rent or commission as well as on the service tax component. The recipient certificates supported that position. The demand raised on reverse charge basis also could not stand for services supplied by private limited companies or limited companies, since such persons were outside the reverse charge category under Notification No. 30/2012-Service Tax dated 20.06.2012. Form 26AS entries, without independent evidence of taxable service, were insufficient to determine service tax liability.

Conclusion: The demand on merits was not sustainable and was against the Revenue.

Issue (ii): Whether the demand was barred by limitation and whether extended period could be invoked.

Analysis: The demand for part of the period was beyond five years. The department had already undertaken scrutiny and audit, which included examination of Form 26AS, and the returns had been regularly filed. The show cause notice did not invoke the proviso to Section 73(1) in the operative part, and no suppression or mala fide intent was established. The reverse charge portion was also revenue neutral, as credit would have been available on payment of tax.

Conclusion: Extended limitation was not available and the demand was time-barred against the Revenue.

Final Conclusion: The entire tax demand, along with interest and penalty, failed both on merits and on limitation, and the appellate relief was granted to the assessee.

Ratio Decidendi: Service tax liability cannot be fastened merely from Form 26AS figures without independent proof of a taxable service, and extended limitation cannot be invoked in the absence of suppression, especially where the department had already scrutinized the returns or where the dispute is revenue neutral.

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