2026 (2) TMI 672 - AT - Service Tax

Evidentiary Value of Third-Party Tax Records: Form 26AS alone cannot sustain extended-period service tax demands.

Notification No.25/2012 ST exemption claimed for services to rural branches was not demonstrated by documentary proof, so the confirmed service tax demand ... Sustainability of service tax demand - taxable services under the category of “Maintenance and Repair Services”, “Business Auxiliary Services” etc - exemption for services in rural areas under Notification No.25/2012-ST (Sl.No.29(g)) - reliance on Form 26AS / Income tax returns for raising service tax demands - extended period of limitation - requirement of independent corroborative evidence to establish rendition of taxable services - adjustment of negative liability after verification - HELD THAT:- On going through the details of the present case, it is seen that the demand has been made based on the 26AS Returns in respect of the IT Returns filed by the Appellant. It is clear that the investigation was taken up only after receiving the information from Income Tax Department. It is also on record that while the Show Cause Notice was proposing to demand Rs.1.45 Crores. After proper clarification by the Appellant and verification by the lower authorities, the same was brought down to the tune of Rs.41.01 Lakhs. Admittedly, the Revenue is not agitated by the dropping of demand of over Rs.1.03 Crores. In respect of the services rendered to the Rural Areas, the appellant has not charged the Service Tax. All these point out that proper case of suppression with intent to evade payment of Service Tax has not been made out clearly against the Appellant. In respect of demands made based on the Form 26AS and IT Returns, this Bench in the case of Tabassum Enterprises vs. C, CGST & CX [2025 (9) TMI 1275 - CESTAT KOLKATA], Applying the ratio of this case law, hold that the demand for the extended period is legally not sustainable. From the Table V of the Order-in-Appeal reproduced above, it is seen that in case of period 2015-16, the liability for Service Tax shows as (–) Rs.19,66,876. While I set aside the demand for the extended period. The Appellant should be given the benefit of this minus figure of Rs.19,66,876/- after due verification, when the actual quantification for the normal period is arrive at. Thus, the Appeal stands partly allowed. The Appellant would be eligible for consequential relief, if any, as per law. Issues: (i) Whether the confirmed service tax demand is sustainable on merits in view of claim of exemption under Notification No.25/2012 ST (Sl. No.29(g)); (ii) Whether the service tax demand for the extended period, raised solely on the basis of Form 26AS/Income Tax data, is legally sustainable.Issue (i): Whether the appellant is entitled to exemption under Notification No.25/2012 ST (Sl. No.29(g)) for services rendered in rural areas and whether the confirmed demand is sustainable on merits.Analysis: The factual record was examined for evidence demonstrating that the services were rendered to rural branches qualifying under Notification No.25/2012 ST (Sl. No.29(g)). The appellate table of taxable values and tax liabilities was considered. The appellant did not produce documentary proof to establish that the services fell within the exemption category or that the recipients were rural branches as required to claim the notification benefit. The adjudicatory reductions effected at earlier stages were noted.Conclusion: The confirmed demand is sustainable on merits to the extent recorded by the authorities; the exemption under Notification No.25/2012 ST (Sl. No.29(g)) is not established in the absence of supporting evidence.Issue (ii): Whether the extended period demand, based primarily on Form 26AS/Income Tax returns and data received from the CBDT, is sustainable without independent corroborative evidence.Analysis: Precedent and doctrinal principles regarding the evidentiary value of Form 26AS and income tax returns for imposing service tax were applied. The reliance solely on third party Income Tax records, without independent verification from service tax records or evidence connecting service provider, service rendered, service recipient and consideration, was evaluated. The case facts show that an initial show cause notice for a larger amount was substantially reduced after verification and clarification; there was no clear finding of suppression with intent to evade. The Tribunal's prior decisions treating Form 26AS entries as insufficient by themselves to sustain extended period demands were followed.Conclusion: The extended period demand based solely on Form 26AS/Income Tax data is not sustainable; the extended period of limitation cannot be invoked on that basis. The negative liability shown for 2015 16 (- Rs.19,66,876) should be given benefit after verification when quantifying the normal period liability.Final Conclusion: The appeal is partly allowed - the confirmed demand remains in part on merits for lack of evidence to establish exemption, while the extended period demand founded only on Income Tax data is set aside and consequential adjustments are directed.Ratio Decidendi: A demand for service tax and invocation of the extended period of limitation cannot be sustained solely on the basis of Form 26AS or income tax returns; independent and corroborative evidence connecting the service provider, the service rendered, the service recipient and the consideration is essential to establish liability under the service tax laws.