Can Service Tax Be Demanded Solely on Form 26AS Data Without Pre-SCN Consultation? Gauhati High Court Remand Back Matter to CESTAT

The Gauhati High Court while remanding the matter to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service tax cannot be demanded solely on Form 26AS data without Pre-SCN consultation. The bench of Justice Michael Zothankhuma and Justice Shamima Jahan has observed that the show cause notice was issued to the respondent on 21.10.2019 and the issue of payment of Service Tax had been finalized by the Principal Commissioner, CGST, Dibrugarh, vide order dated 22.10.2021, i.e., prior to the subsequent Circular dated 11.11.2021 and the clarification made thereunder. Further there is nothing in the show cause notice dated 21.10.2019, to show that the Service Tax sought to be levied upon the respondent, was due to fraud or collusion or willful mis-statement or suppression of facts or contravention of any of the provision of the Central Excise Act, 1944 or Chapter V of the Finance Act, 1994 or the Rules made there under. The dispute arose from a show cause notice dated January 21, 2019, issued to the respondent-assessee for payment of service tax under Section 67 of the Finance Act, 1994. The demand was computed on the basis of data reflected in Form 26AS filed under the Income Tax Act for the period 2013–14 to 2017–18. The department alleged that the assessee had received payments for works executed under various government authorities, including the Public Works Department (PWD), Airports Authority of India, and Indian Railways, and was liable to pay service tax for the period 2014–15 to 2017–18. The Principal Commissioner, CGST, Dibrugarh, by order dated October 22, 2021, confirmed a service tax demand of ₹6.39 crore against the assessee. Aggrieved, the assessee approached the CESTAT, Kolkata, which by Final Order dated August 11, 2022, set aside the demand. The Tribunal had primarily relied on two grounds. Firstly, service tax demand cannot be based solely on Form 26AS data. Secondly, pre-show cause notice consultation was not conducted, despite the demand exceeding ₹50 lakh, as mandated under the Master Circular dated March 10, 2017. The Tribunal held that income tax returns and service tax assessments operate in distinct statutory domains, and discrepancies may arise due to exemptions and differences in reporting requirements. The department challenged the CESTAT order under Section 35G of the Central Excise Act, 1944, raising substantial questions of law, including: Whether pre-SCN consultation was mandatory; Whether service tax can be demanded based on Form 26AS statements; and Whether the show cause notice violated CBIC instructions. The High Court referred to the CESTAT’s decision in Shree Kankeshwari Enterprise v. Commissioner of Central Excise & Service Tax, Bhavnagar, which held that service tax demand cannot be sustained solely on the basis of 26AS data without independent inquiry. It also noted a similar view expressed by the Gujarat High Court in Nimeshbhai Gunvantbhai Patel v. Union of India. The Bench observed that income tax and service tax laws operate in different and independent fields, and reliance exclusively on Form 26AS data, without investigation or corroborative material, would be legally untenable. On the issue of pre-show cause notice consultation, the Court examined Paragraph 5.0 of Master Circular No. 1053/2/2017-CX dated March 10, 2017, which made pre-SCN consultation mandatory in cases involving demands above ₹50 lakh (except preventive/offence-related cases). The Court further considered Circular No. 1079/03/2021-CX dated November 11, 2021, which clarified that pre-SCN consultation is not mandatory in cases involving fraud, collusion, wilful misstatement, suppression of facts, or intent to evade tax. However, the Court noted that the show cause notice was issued on October 21, 2019. The adjudication order was passed on October 22, 2021 — prior to the November 2021 clarification. The show cause notice did not allege fraud, suppression, or wilful misstatement. Accordingly, the Court observed that non-issuance of pre-SCN consultation rendered the proceedings unsustainable in law. Despite finding infirmities in the show cause notice and adjudication order, the Bench noted that the matter had not been decided on merits, but only on technical grounds. With the consent of both parties, the Court directed that the matter be remanded to the CESTAT, Kolkata, for fresh adjudication on merits. The Tribunal has been directed to consider the work orders, invoices, and other documents already placed on record and pass a reasoned order after granting an opportunity of hearing to both sides. The Court clarified that the case should not be relegated back to the adjudicating authority, given the passage of several years and the advanced stage of proceedings. The High Court set aside the CESTAT’s Final Order dated August 11, 2022, and disposed of the appeal with directions to the Tribunal to decide the matter afresh on merits. Case Details Case Title: Principal Commissioner Of Central Goods And Service Tax And Customs Versus M/S Numal Saikia Citation: JURISHOUR-61-HC-2026(GAU) Case No.: C.Ex.App./7/2025 Date: 20-02-2026 Counsel For Petitioner: S C Keyal Counsel For Respondent: S Mitra Click Here To Read Order Read More: Amended Formula U/R 89 (5) For Inverted Duty Refunds Is Retrospectively Applicable: Andhra Pradesh HC

Can Service Tax Be Demanded Solely on Form 26AS Data Without Pre-SCN Consultation? Gauhati High Court Remand Back Matter to CESTAT

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