The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the extended period of limitation under the Finance Act, 1994 cannot be invoked merely because the Department relied on information reflected in the assessee’s Form 26AS and Income Tax records, particularly when there is no evidence of suppression or intent to evade tax. 

The bench of P.K. Choudhary (Judicial Member) has set aside the service tax demand for the period 2013-14 to 2015-16 as time-barred while sustaining the demand only for the normal limitation period from 1 April 2016 to 30 June 2017. It also deleted all penalties imposed on the assessee. 

The appellant/assessee is a proprietary concern engaged in providing cable operator services, works contract services, construction, maintenance and repair services, and erection and installation services. The appeal challenged the Order-in-Appeal dated 17 July 2025, which had affirmed the adjudicating authority’s order confirming service tax demand along with interest and penalties. 

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The dispute originated from a show cause notice dated 18 October 2018 covering the period from 2013-14 to June 2017. The Department alleged service tax liability on cable operator services by denying the benefit of the small service provider exemption on the ground that services were provided under another person’s brand name. Service tax liability on works contract services based primarily on information available in Form 26AS. 

After adjudication, the original authority confirmed a service tax demand of ₹10,21,571, ordered recovery of interest, imposed an equivalent penalty under Section 78, besides separate penalties under Sections 77 and 70, while dropping a substantial portion of the original demand. 

The confirmed demand comprised Cable Operator Services: ₹6,80,503 and Works Contract Services: ₹3,41,068 making a total confirmed demand of ₹10,21,571. 

The appellant contended that for cable operator services, its aggregate turnover remained below the threshold prescribed under the Small Service Provider Exemption Notification. It also argued that it had already paid service tax on input services received from DEN and was entitled to avail CENVAT credit. The denial of such credit merely because ST-3 returns had not been filed was only a procedural objection and could not defeat substantive entitlement.

Regarding works contract services, the assessee argued that several contracts, including laying optical fibre under the National Optical Fibre Network (NOFN) project and underground cable works, were either not taxable or incorrectly assessed.

More importantly, the appellant challenged invocation of the extended limitation period, submitting that all receipts had been duly reflected in its books of account, balance sheets and income tax returns. Since the entire demand itself was generated from Form 26AS data available with the Income Tax Department, there could be no allegation of suppression of facts or wilful intent to evade service tax. 

The tribunal observed that the Department had failed to establish any material indicating fraud, wilful misstatement or suppression of facts.

The Tribunal noted that the assessee had maintained proper books of accounts. Transactions were duly disclosed in income tax records. The dispute arose mainly because of differing interpretations regarding taxability of the services. The Department itself relied upon Form 26AS and income tax information for initiating proceedings, making allegations of suppression unsustainable. 

The Tribunal further observed that the appellant’s activities differed from those of a conventional local cable television operator. Given the complex statutory definitions under the Cable Television Networks (Regulation) Act, 1995, there existed a genuine possibility that the assessee entertained a bona fide belief regarding non-taxability of its services. 

The Tribunal relied upon its earlier decision in Ajitabh Mishra v. Commissioner of Central Excise & CGST, Raipur (2025), wherein it had been held that when transactions are fully disclosed in income tax returns and balance sheets, the extended limitation period cannot be invoked solely on the basis of information obtained from the Income Tax Department.

It also referred to several earlier Tribunal rulings reiterating that disclosure in statutory financial records negates allegations of suppression or deliberate concealment required for invoking the extended period of limitation. 

Since the Tribunal found that the appellant had acted under a bona fide belief and there was no evidence of deliberate tax evasion, it invoked Section 80 of the Finance Act, 1994 to set aside Penalty under Section 78, Penalties under Sections 77(1)(a) and 77(2), and Penalty under Section 70. 

The Tribunal held that the service tax demand for 2013-14 to 2015-16 was barred by limitation and therefore liable to be set aside. The demand for the normal period from 1 April 2016 to 30 June 2017 would survive. All penalties imposed upon the appellant were deleted. 

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