Form 26AS Alone Cannot Sustain Service Tax Demand Without Precedent Review: CESTAT Orders Fresh Decision in One Month [Read Order]
The Tribunal held that the applicability of precedent must first be examined by the Commissioner (Appeals).
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), remanded the service tax dispute arising solely from Form 26AS discrepancies, holding that such demand cannot be sustained without first examining the applicability of binding precedent. The Tribunal directed the Commissioner (Appeals) to undertake this exercise and ordered that a fresh decision be rendered within one month from the receipt of the order.
Rama Overseas Company, represented through its proprietor, was issued a demand for service tax on the basis of figures reflected in Form 26AS. The proceedings arose after the Department initiated action by comparing entries in Form 26AS with those declared in the assessee’s financial statements and Service Tax returns.
The primary issue before the Tribunal was whether tax liability could be sustained solely on the basis of Form 26AS discrepancies without establishing that the receipts reflected therein represented taxable services. The Commissioner (Appeals) had previously remanded the matter, and the assessee contended that the directions issued earlier were not complied with.
Counsel Rahul Gajera, appearing for the appellant, argued that the case was fully covered by the decision of the Division Bench of the Allahabad Bench of the Tribunal in M/s. Yards and Yields Infratech Pvt. Ltd. (2025). He submitted that the Department had made no effort to establish the essential components of taxability under the Finance Act, 1994, including identifying service recipients, proving actual rendering of services, or demonstrating that the amounts reflected in Form 26AS constituted consideration for taxable services.
On the other hand, Sarjeet Kumar, appearing for the Department, argued that the precedent cited was not available before the original adjudicating authority and therefore could not have been considered. He contended that Form 26AS is a statutory document received from the Income Tax Department and forms a credible basis for initiating proceedings.
The bench of Judicial Member Somesh Arora observed that the case had not been adjudicated on merits at multiple stages and that essential issues remained unresolved. The Tribunal reproduced the key observations of the Allahabad Bench, which held that Form 26AS alone cannot constitute the basis for determining service tax liability without independent verification of the nature of receipts.
The Tribunal noted that since the Commissioner (Appeals) had not examined the applicability of the precedent, the matter must again be remanded for proper consideration. The order states:
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“This direction will not prevent the appellant to seek answers on the preliminary issues raised by them. However, in case the Commissioner (Appeals) is of the view that the decision quoted above is squarely applicable it is left open for him to decide the peripheral issues or not. Matter has already shuttled a lot and the appellant have suffered litigation. Therefore, same should be decided within a month of receipt of this order by the Commissioner (Appeals). Appeal is allowed by way of remand.”
Accordingly, the appeal was allowed by way of remand with strict timelines for fresh adjudication.
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