Service tax demands based blindly on Form 26AS data without

Service tax demands based blindly on Form 26AS data without independent verification or justified invocation of the extended period are legally unsustainable.

Issue

Whether the tax department is legally justified in raising a service tax demand under the extended period of limitation for the period 2016-17 based solely on the data reflected in the income-tax Form 26AS, without independently examining the nature, taxability, and potential exemptions of the works contracts executed for government bodies.

Facts

The Business: The assessee is a proprietary concern engaged in executing infrastructure works contracts (including roads, bridges, and allied developments) for various Government departments, such as the Public Works Department (PWD) of Assam.
Exemption Claimed: Being registered under the service tax regime, the assessee claimed statutory exemptions on these government contracts under Entries 12 and 13 of the Mega Exemption Notification No. 25/2012-Service Tax.
The Departmental Action: The tax department retrieved the gross receipt figures from the assessee’s income-tax Form 26AS for the period 2016-17. Treating these figures as taxable turnover, the department initiated a show-cause notice and confirmed a service tax demand by invoking the extended period of limitation under the transitional and saving clauses of the GST laws (Section 142 of the CGST/Assam GST Act).
The Appeal History: Consequential interest and heavy penalties were imposed on the assessee, and the first appellate authority subsequently dismissed the assessee’s appeal.
The Assessee’s Defense: The assessee moved a higher appellate forum, contending that the department mechanically relied on third-party income-tax data without analyzing whether the underlying services were exempt, and completely failed to establish the prerequisites (such as fraud, collusion, or willful misstatement) necessary to trigger the extended period of limitation.

Decision

Form 26AS Cannot Form Sole Basis of Demand: Held in favour of assessee. A tax demand cannot be sustained if it is founded blindly on third-party electronic records like Form 26AS without an independent scrutiny of the actual contracts, invoices, and the nature of services rendered.
Extended Limitation Invalidated: Held in favour of assessee. The revenue authorities cannot invoke the extended period of limitation without recording specific satisfaction and proving active tax evasion or concealment.
Precedent Followed: Held in favour of assessee. The Gauhati High Court’s ruling in Technocom v. Union of India (2026) specifically held that demands based purely on Form 26AS data without independent verification are an unauthorized assumption of jurisdiction. Since the facts are identical, the same relief applies. The Order-in-Original and Order-in-Appeal were quashed, completely erasing the service tax demand, interest, and penalties.

Key Takeaways

Form 26AS is Not Proof of Taxable Service: Form 26AS is an internal accounting map under the Income-tax Act reflecting gross cash flows and TDS deductions. It is not definitive proof of a taxable service under indirect tax laws, as it does not distinguish between taxable revenues, exempt receipts, or capital sums.
Mechanical Reopenings Are Illegal: The tax department must perform its own due diligence before issuing show-cause notices. Cross-checking figures across databases (Income Tax vs. Service Tax/GST) is only a starting point for an inquiry; it cannot substitute for a formal, reasoned assessment of taxability.

HIGH COURT OF GAUHATI

Debojit Deb

Union of India

KARDAK ETE, J.

WP(C) No. 1653 of 2026

JUNE 12, 2026

38. Therefore, under such circumstances, this Court is of the considered view that the determination made by the respondent authorities by issuing the demand cum show cause notice and the confirmation in the impugned order-in-original is contrary to the provisions of the Act and the law declared by the Apex Court as well as by the High Court. The impugned order-in-original is therefore is bad and the same is liable to set aside.

40. A perusal of the Section 73 of the Finance Act reveals that the extended period in respect of recovery of service tax not levied or paid or short levied or short paid or erroneously refunded can be invoked only when any or more of the conditions prescribed under the proviso to the said section is present. Under the proviso to the said section, there are five situations when the extended period of limitation can be invoked. These are:

(a)

Fraud; or

(b)

Collusion; or

(c)

Willful misstatement; or

(d)

Suppression of facts; or

(e)

Contravention of any of the provisions of this Chapter or of the rules made there under with intent to evade payment of service tax.

46. Such conclusions as have been discussed above are contrary to the facts which are evident from the pleadings. In any view of the matter for invocation of the provisions of Section 73 for extension of the period of limitation, it must necessarily be a case which falls under any or all the conditions specified under the proviso to Section 73(1) of the CGST Act. From a plain reading of the impugned Order-in-Original and the relevant portions of which have been extracted above, it is evident that there is no finding by the Adjudicating Authority that the case of the petitioner can be considered to be a case which falls under the conditions specified in proviso to Section 73(1). Under such circumstances, the impugned Order-in-Original appears to the Court to have been assumption of jurisdiction by the revenue authorities which was not otherwise vested on the said authority. For the revenue authorities to invoke powers under Section 73(1), there must be a finding and a conclusion arrived at based on the facts of the case that the petitioner assessee had willfully and deliberately resorted to fraud, collusion, willful misstatement, suppression of facts of contravention of any of the provision thereunder with the intent to evade payment of service tax. Therefore, for invocation of the powers proviso to Section 73(1), there must be a conclusive finding arrived at by the Revenue authorities that the petitioner assessee had resorted to any or all for these acts or omissions with the sole intention to evade payment of service tax. Such finding is not discernable from the impugned Order-in-Original passed by the Revenue Authorities. Therefore, the assumption of jurisdiction of the Revenue under the proviso to Section 73(1) has to be concluded to be a jurisdiction assumed by the Revenue authorities not vested on it by the statute. Such assumption of jurisdiction therefore, being contrary to the provisions of the statute itself, the same is colourable and therefore it is held to be unauthorized.

57. From a careful analysis of the judicial pronouncements as discussed above, it is clear that if an authority while making the inquiry rejects a consideration which is relevant and/or takes into consideration materials and other information which are not relevant, the said decision can be said to be a decision in excess or without jurisdiction. In the present case the adjudicating authority took into consideration the information available in form 26AS of the Income Tax Act, the sole basis for the purpose of levy of service tax. The authority did not consider the services rendered by the petitioner were exempted from levy of service tax or the liability to pay the service tax on the said services was on the recipient on the services. Since the adjudicating authority did not take into consideration those relevant materials which it was bound to take into consideration and on the other hand it had taken into consideration factors and materials, which if not irrelevant and not germane for deciding the liability of the service tax, cannot establish the liability of the assessee, then the said actions of the adjudicating authority is certainly without jurisdiction and/or is in excess of jurisdiction and thereby the impugned actions, orders and notices issued by the adjudicating authority are liable to interfered with by this Court in exercise of its extra ordinary jurisdiction under Article 226 of the Constitution of India.

71. In the facts and circumstances of the case, it is the conclusion arrived at by this Court that such preconditions mandated by law under section 73(1) having not been fulfilled by the Revenue authorities, their assumption of jurisdiction under section 73(1) of the GST Act was completely unwarranted and revenue authorities could not have assumed the jurisdiction under section 73(1) unless these pre-conditions mandated and a conclusion thereto has been arrived at by the Revenue authorities before assumption of such jurisdiction. It is under these circumstances that notwithstanding the availability of statutory alternative remedy, this Court considers it an appropriate case to invoke its jurisdiction under Article 226 to interfere with the impugned order in original and to set aside and quash the order-in-original. Under these circumstances, the case laws referred to by the respondents will have no bearing in the facts and circumstances of the present proceedings. There is also no quarrel with the general proposition of law that in the face of statutory alternative remedy being available, a Writ Court would ordinarily not invoke its power of issuance of prerogative Writs. Since this Court has held that the levy of service tax on the petitioner by extending the limitation is contrary to the provisions of law, the natural corollary that would follow is that the levy of all penalty, surcharge and interest are also not leviable on the petitioner, this Court therefore issues a writ of certiorari setting aside the impugned order in original and it is ordered accordingly.

72. Therefore the writ petition stands accordingly allowed. However no order as to cost. Pending I.A.s are also dismissed and the interim order if any stands merged.”

11. A perusal of the aforesaid judgment shows that the co-ordinate Bench of this Court held that a service tax demand founded solely on Form 26AS, without any independent examination of the nature of services rendered and without recording the statutory preconditions necessary for invocation of the extended period of limitation under Section 73 of the Finance Act, 1994, is unsustainable in law. It is further held that such assumption of jurisdiction by the adjudicating authority would be unauthorized and liable to be interfered with in exercise of powers under Article 226 of the Constitution of India. Consequently, the impugned order-in-original in that case was set aside and quashed together with the consequential demand of interest and penalties.

12. In the present case, both the learned counsel for the parties are in consensus that the issue involved stands covered by the decision of the coordinate Bench in Technocom (supra), to which this Court is in full agreement with. Thus, I am of the considered opinion that no further adjudication is required in the present proceedings as the issue has already settled by this Court. Thus, the petitioner is entitled to similar relief as granted in Technocom (supra).

13. Accordingly, the impugned Order-in-Original No. 19/Addl. Commr./S.Tax/GST/Dimapur/2022-23 dated 31.03.2023 passed by the Assistant Commissioner, Central Goods and Services Tax, Ministry of Finance, Department of Revenue, Government of India, and the consequential Order-In-Appeal No. GAPPL/COM/STP/ 1371/2023-APPEAL-GUWAHATI/1318 dated 29.02.2024 passed by the Commissioner (Appeals), CGST, Guwahati, affirming the aforesaid Order-in-Original, are hereby set aside and quashed. Consequently, the demand of service tax, interest and penalties imposed upon the petitioner pursuant thereto shall also stand set aside.

14. Writ petition accordingly stands allowed and disposed of.