CESTAT Quashes Extended Service Tax Demand Based Solely on Form 26AS, Grants ₹19.66 Lakh Negative Liability Relief [Read Order]
Lower authorities did not consider the exemption provided for service tax in a notification. CESTAT partly allowed appeal as service tax to rural area banks and insurance companies have to be reduced.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, has set aside the extended period demand of service tax raised solely based on Form 26AS data and granted the benefit of Rs. 19.66 lakh reflected as negative service tax liability for the relevant period.
The appellant, after detailed verification, was issued a show cause notice (SCN) demanding service tax of INR 1,45,77,232/-. The Adjudicating Authority after following principles of natural justice confirmed the demand of INR 88,63,209/- and dropped the balance demand.
The Commissioner (Appeals), after going through the details, confirmed the demand of INR 41,02,559/- and dropped the balance confirmed demand. The Revenue department has not filed any appeal against any order with regards to the present case.
The counsel for the appellant submitted that the appellant had not been charged service tax in consideration of the exemption in Notification No. 25/2012-ST dated 20.06.2012 under SI.No.29(g). Additionally, the counsel submitted that the Commissioner failed to consider this exemption and grant the benefit.
Finally it was submitted that the demand for the period 2011-12 to 2015-16 was issued by SCN dated 28.11.2017 invoking the extended period provisions. Reliance was placed on precedents which held that demand for an extended period cannot be made on basis on ITR.
The tribunal carefully looked into the merits of the submissions of the appellant and held that they had not provided evidence to show that the services were, in fact, rendered to the rural branches of the banks and insurance companies so as to claim the exemption available under Notification No. 25/2012.
On one hand, CESTAT observed that the demand is sustainable. On the order, the single member bench of R. Muralidhar (Judicial Member) relied on Tabassum Enterprises v. C, CGST & CX (2025) where it was held that demand without evidence cannot be sustained. Consequently, the appeal was partly allowed and the liability for service tax was held in the negative figures, this was to be verified when actual quantification for the normal period is arrived at.
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