Service tax reassessment remand follows expanded demand based on third-party data and fresh adjudication opportunity.

An order-in-original under Section 73(2) of the Finance Act, 1994, based on third-party data and enhancing the service tax demand beyond the show-cause notice, was set aside. The Karnataka High Court followed its earlier remand approach and held that the assessee should be permitted to file a fresh reply and place material before the adjudicating authority. The matter was remitted for reconsideration in light of the scope of Section 65B(44), the negative list, Notification No. 25/2012-ST, liability under Rule 2(1)(d) of the Service Tax Rules, and limitation, with all contentions kept open.

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Issues: Whether the order-in-original raising service tax demand was liable to be set aside and the matter remitted to the stage of reply to the show-cause notice.

Analysis: The impugned order-in-original was passed under Section 73(2) of the Finance Act, 1994 on the basis of third-party data and resulted in a substantial enhancement of the quantified demand vis-a -vis the show-cause notice. The Court followed the earlier remand order in similar matters, where the authorities were required to reconsider the controversy after keeping in view the scope of Section 65B(44) of the Finance Act, 1994, the negative list, the exemption under Notification No. 25/2012-ST dated 28.06.2012, liability under Rule 2(1)(d) of the Service Tax Rules, 1994, and limitation. The Court accepted that the petitioner should be given an opportunity to file a fresh reply and place material before the adjudicating authority, while all contentions were kept open.

Conclusion: The order-in-original was set aside and the matter was remitted to the stage of reply to the show-cause notice in favour of the assessee.

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