Levy of Service Tax based on third-party income tax returns remitted for fresh adjudication; pre-deposit dismissal set aside
Levy of service tax was challenged where assessment relied on income inferred from income tax returns/Form 26AS; the High Court noted that fact appears uncontested but reserved all merit and jurisdictional contentions. The court observed the appellate dismissal for non-payment of pre-deposit did not decide the substantive adjudication, set aside the original order, the appellate dismissal and the recovery notice, and remitted the matter for fresh consideration from the stage of reply to the show-cause notice. The petitioner may file fresh pleadings and appear before the authority; earlier connected observations remain applicable to the remand.
Issues: Whether the adjudication order demanding service tax based on income tax returns/Form 26AS is sustainable and whether the Orders-in-Original, the order in appeal (dismissal for non-payment of pre-deposit) and the recovery notice should be set aside and the matter remitted to the stage of reply to the show-cause notice for reconsideration.
Analysis: The Court noted that service tax was levied on the basis of income inferred from income tax returns and Form 26AS and referred to the earlier order dated 03.07.2024 which directed designated officers, when reconsidering such matters, to examine (i) whether the persons qualify under Section 65B(44) of the Finance Act, 1994, (ii) whether the services fall under the negative list, (iii) whether any exemption under Notification No. 25/2012-ST dated 28.06.2012 or other notifications applies, (iv) liability to remit service tax in terms of Rule 2(1)(d) read with applicable notifications, and (v) questions of limitation. The Court recorded that the appeal dismissal was for non-compliance with pre-deposit requirements and that no adjudication on merits had been undertaken; accordingly the Court remitted the matter for fresh consideration from the stage of reply to the show-cause notice while keeping all contentions open and permitting filing of fresh replies.
Conclusion: The Orders-in-Original, the order in appeal dated 01.02.2024 and the recovery notice dated 24.07.2025 are set aside and the matter is remitted to the authorities to be reconsidered from the stage of reply to the show-cause notice in light of the observations specified (including those in para-10 of the order dated 03.07.2024). The petitioner is permitted to file fresh pleadings and to appear before the authority on the date directed.
TaxTMI 
AI Drafter ✕
TaxTMI 
