Karnataka HC Quashes Service Tax Order, Remands Matter Citing Failure to Consider Exemption Notification and Reliance on TDS Statements/ITR [Read Order]
The court held that the authorities must verify exemption applicability rather than relying solely on TDS statements or Income Tax returns to determine tax liability
![Karnataka HC Quashes Service Tax Order, Remands Matter Citing Failure to Consider Exemption Notification and Reliance on TDS Statements/ITR [Read Order]](https://images.taxscan.in/h-upload/2026/05/19/2137410-karnataka-hc-quashes-service-tax-order-taxscan.webp "Karnataka HC Quashes Service Tax Order, Remands Matter Citing Failure to Consider Exemption Notification and Reliance on TDS Statements/ITR [Read Order]")
In a recent ruling, the Karnataka High Court set aside a Service Tax adjudication order passed against a PWD contractor, holding that the authorities must verify exemption applicability rather than relying solely on TDS statements or Income Tax returns to determine tax liability. Mr. G N Krishna, the Petitioner, challenged an Order-in-Original dated 28.07.2025....
In a recent ruling, the Karnataka High Court set aside a Service Tax adjudication order passed against a PWD contractor, holding that the authorities must verify exemption applicability rather than relying solely on TDS statements or Income Tax returns to determine tax liability.
Mr. G N Krishna, the Petitioner, challenged an Order-in-Original dated 28.07.2025. The Petitioner contended that the service tax demand was raised based on inputs from theCentral Board of Direct Taxes and figures appearing in Form 26AS, without properly examining whether his services were exempt under Entry 13 of Notification No. 25/2012-ST.
The Petitioner argued that his services ought to have been examined in light of Entry 13 of Notification No. 25/2012-ST dated 20.06.2012, which provides specific exemptions, but the authority failed to note this aspect properly. It was submitted that the Court had previously dealt with similar matters in W.P. No. 11154/2023 and connected petitions, where adjudications based primarily on income tax returns were remanded for fresh consideration.
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The Petitioner relied on a previous decision by the same Court in W.P. No. 11154/2023 and connected petitions, where similar matters were remanded for fresh consideration.
Justice S Sunil Dutt Yadav observed that the issue was covered by the Court's earlier order, which had laid down specific parameters for authorities to consider in such cases. The Court directed the authorities to examine:
1. Whether the petitioner qualifies under Section 65B(44) of the Finance Act, 1994.
2. Whether the services are covered under the negative list.
3. Whether the services are covered under the exemption list (Notification No. 25/2012-ST).
4. Whether the person is liable to pay service tax under the relevant rules.
5. Whether the claims are barred by limitation.
Accordingly, the High Court set aside the impugned order and remitted the matter to the stage of the reply to the show cause notice. The Court granted liberty to the Petitioner to file a fresh reply and directed him to appear before the respondent on 25.05.2026.
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