Service Tax cannot be Demanded on mere Difference in Form 26AS/ITR and ST-3 Returns without Independent Evidence: CESTAT [Read Order]

The Customs, Excise and Service Tax AppellteTribunal (CESTAT), Kolkata Bench, held that the sole basis for demanding service tax cannot be the difference in Form 26AS/ITR and ST-3 Returns without independent evidence.

The facts of the case are that on information received from the Income Tax Department as reflected in ITR/Form 26AS and on the comparison of it with the gross value declared in the ST-3 Returns filed by the appellant for 2015-16, the department was found that there was a short payment of service tax on the net taxable value.

A SCN dated 05.10.2020 was issued proposing a service tax demand which was confirmed by Assistant Commissioner, CGST & C.Ex and upheld by Commissioner (Appeals).

The counsel for the appellant submitted that the appellant has furnished a Reconciliation Statement of “ITR vis-a-vis ST-3 Return”. However, the lower authorities have not taken cognizance of it and confirmed the Service Tax demand.

CESTAT observed that the demand has been made merely on the basis of the difference between the Income Tax Returns and ST-3 Returns without conducting any independent verification in respect of the nature of services rendered in or considered received in that year. Reference was pointed out to the precedent in M/s Nanu Shome & Co. v. Commissioner of CGST & C.Ex, Siliguri (2026) and requirement of an independent verification was highlighted.

The bench of K. Anpazhakan (Technical Member) held that the demand confirmed merely on the basis of difference in the values of Income Tax Returns/Form 26AS and ST-3 Returns, is not legally sustainable. It was also noted that the Revenue failed to produce independent evidence. Furthermore, it was held that the conditions for invocation of the extended period of limitation have not been fulfilled.

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