Bank Entries Alone Can’t Decide Taxability Without Proper Verification: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chennai Bench has remanded a service tax demand against Altech Engineering for fresh adjudication, holding that mere reliance on bank statements without proper examination of the nature of receipts is insufficient to determine tax liability. The bench of Ajayan T.V. (Judicial Member ) and M. Ajit Kumar (Technical Member) examined the competing contentions and emphasized that the burden to establish taxability lies on the Revenue, though the assessee is equally obligated to disclose all relevant material facts. While strict rules of evidence may not apply in tax proceedings, an assessee cannot withhold crucial documents and later challenge the department’s conclusions. Mere availability of data is not sufficient—there must be full and truthful disclosure of all material information required for assessment. The dispute arose from a demand of over ₹43 lakh confirmed against the assessee for the period October 2007 to September 2012 under the category of commercial or industrial construction service. The department had primarily relied on credits reflected in the assessee’s bank accounts to compute taxable value, alleging non-payment of service tax along with suppression of facts. The assessee argued that the demand was fundamentally flawed, as several bank entries did not represent taxable services. These included receipts from construction of residential units prior to July 2012, government-related infrastructure projects for the Tamil Nadu Water and Drainage Board, abandoned contracts, income tax refunds, and other non-service-related deposits. It was contended that the department failed to examine supporting documents such as work orders, financial statements, and VAT returns, and instead adopted a mechanical approach of taxing all bank credits. On the other hand, the department maintained that the assessee failed to cooperate during investigation by not furnishing invoices and work orders despite repeated summons. As a result, it was compelled to rely on third-party bank data obtained from multiple banks to quantify the demand. The department also argued that the assessee had collected service tax in certain years but failed to deposit the same with the government, justifying invocation of the extended limitation period. The Tribunal highlighted that the case involved incomplete facts due to non-submission of primary records such as invoices and work orders. While the assessee contested the inclusion of various non-taxable receipts, it had not adequately substantiated its claims before the authorities. At the same time, the Tribunal acknowledged that determination of tax liability requires proper appreciation of facts and cannot be based solely on aggregated bank credits without examining their nature. Taking a balanced view, the Tribunal held that the matter required fresh examination at the original adjudication stage. It stressed that proper fact-finding is essential and should ordinarily be undertaken by the adjudicating authority rather than the appellate forum. Accordingly, the case was remanded with directions to grant the assessee a fair opportunity to submit all relevant documents and explanations. The Tribunal also directed the assessee to fully cooperate with the proceedings and furnish all necessary details without delay. The adjudicating authority has been instructed to complete the fresh adjudication within 90 days while adhering to the principles of natural justice. Case Details Case Title: Altech Engineering Versus Commissioner of GST & Central Excise Citation: JURISHOUR-828-CES-2026(CHE) Case No.: Service Tax Appeal No. 42437 of 2016 Date: 17.04.2026 Counsel For Appellant: V. Ravindran, Advocate Counsel For Respondent: M. Selvakumar, Authorised Representative Click Here To Read Order Read More: Job Work vs Manpower Supply: CESTAT Holds Output-Based Contracts Not Liable to Service Tax

Bank Entries Alone Can’t Decide Taxability Without Proper Verification: CESTAT

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