Form 26AS Data Cannot be Solely Relied Upon for Levying Service Tax: Gauhati High Court [Read Order]

The Gauhati High Court ruled that Form 26AS of the Income Tax Act cannot be solely relied upon for levying service tax.

The matter was appealed before the High Court by the Principal Commissioner of Central Goods and Service Tax and Customs [Pr.C, CGST-C] against the respondent who had worked under various Government authorities such as the PWD, Airport Authority of India, etc from 2014-15 to 2017-18.

A show cause notice dated 21.01.2019 had been issued for the payment of Service Tax under Section 67 of the Finance Act, 1994 by using the returns provided for in Form 26AS of the Income Tax Act. The respondent reply contained work orders and other documents that were the basis of the data provided in 26AS. The reply was that the work done was covered under Entries 12A, 13 and 14 of the Mega Exemption provided under Notification No. 25/12 of Service Tax dated 20.06.2012.

The Pr.C, CGST issued an order directing payment of Service Tax amounting to INR 6,39,09,190/-. The respondent filed an appeal before CESTAT. The tribunal ruled that service tax cannot be levied on the basis of contents of Form 26 which is filed before Income Tax authorities. The order was accordingly set aside.

The Commissioner filed an appeal in the High Court on substantial questions of law as per Section 35(G) of the Central Excise Act, 1944. It was asked whether consultation is mandatory as per Circular No.1079/03/2021-CX, whether service tax can be demanded from Form 26AS, whether the show cause notice was in violation of instruction issued by CBIC.

The High Court relied on several judgments and held that the pre-show cause notice consultation was a necessity as per para 5.0 of the Master Circular No. 1053/2/2017-CX dated 10.03.2017. Further, the show cause notice issued does not show that the service tax sought to be levied was due to fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Central Excise Act, 144 and thus was not sustainable in law.

The bench, consisting of Justice Micheal Zothankhuma and Justice Shamima Jahan, finally held that the matter should be remanded back to CESTAT for determination on the merits of the case.

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