Service tax demand based only on ITR and Form 26AS discrepancies fails without proof of taxable service and consideration.

Service tax demand cannot be sustained merely from discrepancies in Income Tax Returns, balance sheets, or Form 26AS unless the Department independently proves that taxable services were actually rendered, the recipient was identifiable, and consideration was received. The Tribunal held that third-party data and numerical differences in return statements do not by themselves establish exigibility to service tax. Because the foundational facts of service, recipient, and consideration were not proved, the demand was set aside and the impugned orders were annulled.

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Issues: Whether service tax demand could be confirmed merely on the basis of figures reflected in Income Tax Returns and Form 26AS without independently establishing the service provider, the service recipient, the nature of service rendered, and the consideration received.

Analysis: The demand was founded on discrepancies in statutory records such as Income Tax Returns, balance sheets and Form 26AS. The record showed no independent proof connecting the alleged receipts with taxable services rendered to identifiable recipients for consideration. Exigibility to service tax depends on proof of the service, the recipient and the consideration, and the Department was required to establish these foundational facts rather than rely only on third-party data or numerical differences in return statements. The cited Tribunal precedents were followed to hold that such figures by themselves are not sufficient to sustain a service tax demand.

Conclusion: The demand was not sustainable and was set aside; the appeals succeeded.

Final Conclusion: Service tax liability could not be fastened solely on discrepancies in Income Tax Returns or Form 26AS in the absence of proof of taxable services and consideration, and the impugned orders were annulled.

Ratio Decidendi: A service tax demand cannot be sustained merely on the basis of entries in Income Tax Returns or Form 26AS unless the Department establishes by evidence that taxable services were actually rendered to identifiable recipients for consideration.

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