Service tax on multilevel marketing cannot rest on income-tax data alone without proof of a taxable service.

Service tax demand on multilevel marketing activity under Business Auxiliary Service was found unsustainable where the Revenue relied only on Form 26AS and income-tax data without independent corroboration of a taxable service. The Tribunal treated the activity as sale-linked business activity and held that tax liability could not be confirmed merely from third-party figures. The extended period of limitation was also held unavailable because the material did not establish suppression of facts or wilful intent to evade tax. The demand was therefore set aside on merits and limitation.

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Issues: (i) whether the appellant's multilevel marketing activity amounted to a taxable service under Business Auxiliary Service and whether the demand based on Form 26AS and income-tax data was sustainable on merits; (ii) whether the extended period of limitation could be invoked on the basis of the material relied upon by the Revenue.

Issue (i): whether the appellant's multilevel marketing activity amounted to a taxable service under Business Auxiliary Service and whether the demand based on Form 26AS and income-tax data was sustainable on merits.

Analysis: The demand was founded on third-party income-tax material, but the Tribunal found that the taxable value had been enhanced mechanically and without statutory basis. The record showed that the Revenue had not established the service element through independent corroboration. Relying on the earlier decisions dealing with similar multilevel marketing arrangements, the Tribunal treated the activity as sale-linked business activity rather than a taxable service, and held that demand cannot be confirmed merely from income-tax figures without proof of rendition of taxable service.

Conclusion: The demand was not sustainable on merits and was set aside.

Issue (ii): whether the extended period of limitation could be invoked on the basis of the material relied upon by the Revenue.

Analysis: The notice was issued long after the relevant period, yet the Revenue relied only on income-tax data and Form 26AS. The Tribunal held that such material, by itself, did not establish suppression of facts or intent to evade tax. In the absence of cogent evidence showing concealment, the extended period was held to be unavailable.

Conclusion: The extended period of limitation could not be invoked and the demand was hit by limitation.

Final Conclusion: The impugned order was unsustainable on both merits and limitation, and the appeal was allowed with consequential relief according to law.

Ratio Decidendi: Service tax demand cannot be sustained merely on the basis of Form 26AS or income-tax data without independent corroborative evidence of a taxable service, and limitation cannot be extended absent proof of suppression or wilful misstatement.

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