Service tax demand cannot rest on income-tax data alone; post-2012 liability must follow the negative list charging regime.

A service tax demand cannot be sustained where it rests only on Income Tax Returns, Form 26AS, balance sheet and profit and loss account without independent verification of the nature of receipts or corroborative evidence of taxable services from the recipient's side. The demand was therefore set aside. For the period after 30.06.2012, liability had to be tested under the negative list regime and the applicable charging provisions, not under the erstwhile business auxiliary service classification. As the notice and order proceeded on repealed or inapplicable pre-2012 provisions, the demand for the post-30.06.2012 period was also unsustainable and was set aside, with interest and penalties falling with the principal demand.

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Issues: (i) Whether a demand of service tax could be sustained when it was raised solely on the basis of Income Tax Returns, Form 26AS, Balance Sheet and Profit & Loss Account, without any independent verification or corroborative evidence of taxable services. (ii) Whether a demand for the period after 30.06.2012 could be maintained by invoking erstwhile provisions relating to business auxiliary service instead of the levy provisions applicable under the negative list regime.

Issue (i): Whether a demand of service tax could be sustained when it was raised solely on the basis of Income Tax Returns, Form 26AS, Balance Sheet and Profit & Loss Account, without any independent verification or corroborative evidence of taxable services.

Analysis: The demand was founded only on a comparison of third-party income-tax data with the appellant's financial statements. No independent enquiry was conducted to ascertain the nature of the receipts or whether they represented taxable services. The demand was also unsupported by corroborative material from the service recipient's end. In such circumstances, mere reliance on Form 26AS and related income-tax records does not establish liability to service tax.

Conclusion: The demand was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether a demand for the period after 30.06.2012 could be maintained by invoking erstwhile provisions relating to business auxiliary service instead of the levy provisions applicable under the negative list regime.

Analysis: For the period after 30.06.2012, service tax had to be examined under the negative list framework and the charging provision applicable to all taxable services. The notice and the impugned order, however, proceeded on the basis of the erstwhile category of business auxiliary service under pre-negative list provisions and did not invoke the relevant post-30.06.2012 charging provisions. A demand for 2014-15 to 2016-17 could not be sustained on repealed or inapplicable pre-2012 provisions.

Conclusion: The demand was legally unsustainable on this ground as well and was set aside in favour of the assessee.

Final Conclusion: The impugned order was set aside, the tax demand was annulled, and the connected interest and penalties also fell with the principal demand.

Ratio Decidendi: A service tax demand cannot be sustained merely on the basis of income-tax data without independent verification of taxable service, and for the post-30.06.2012 period the levy must be founded on the applicable charging provisions of the negative list regime, not on erstwhile service-classification provisions.

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