Service Tax demand cannot rest on Form 26AS alone; independent proof of taxable service is required, and limitation failed too.

Service Tax demand based only on CBDT data, Form 26AS and ITR figures was held unsustainable because the Revenue made no independent verification or corroborative enquiry to establish rendition of a taxable service under the Finance Act, 1994. The Tribunal found that mechanical reliance on income-tax data could not, by itself, prove service tax liability, and the demand was set aside. As the demand lacked evidentiary support and no suppression with intent to evade tax was shown, the extended period of limitation was not invokable. Interest and penalty also fell with the demand and were annulled.

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Issues: (i) Whether Service Tax demand confirmed solely on the basis of CBDT data and Form 26AS, without independent verification or corroborative evidence, was sustainable; (ii) whether the extended period of limitation and consequential interest and penalty could be invoked on the facts of the case.

Issue (i): Whether Service Tax demand confirmed solely on the basis of CBDT data and Form 26AS, without independent verification or corroborative evidence, was sustainable.

Analysis: The demand was founded only on comparison of income-tax data with ST-3 returns. No independent enquiry was undertaken to ascertain the nature of the services rendered or to establish that the receipts represented taxable service turnover under the Finance Act, 1994. Mechanical reliance on Form 26AS and ITR figures, without proof of rendition of taxable service, was held to be impermissible. The Tribunal followed its earlier decisions holding that income-tax data by itself cannot sustain a service tax demand unless supported by corroborative material.

Conclusion: The demand on this basis was unsustainable and was set aside in favour of the assessee.

Issue (ii): Whether the extended period of limitation and consequential interest and penalty could be invoked on the facts of the case.

Analysis: Since the demand itself rested only on income-tax data and no independent investigation established suppression with intent to evade tax, the ingredients for invoking the extended period were not satisfied. The Tribunal also accepted that the non-response to departmental letters issued during the peak of the COVID-19 period could not, by itself, justify invocation of the extended period. Once the demand failed, the foundation for interest and penalty also disappeared.

Conclusion: The extended period of limitation was not invokable, and the interest and penalty were also unsustainable.

Final Conclusion: The impugned demand, along with interest and penalty, was annulled and the appeal was allowed.

Ratio Decidendi: A Service Tax demand cannot be sustained merely on the basis of income-tax data or Form 26AS unless the Revenue independently verifies and establishes rendition of taxable service; in the absence of proved suppression with intent to evade tax, the extended period of limitation is not invokable.

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