The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi has set aside a service tax demand of Rs. 74,909 against an unregistered service provider after holding that the assessee was entitled to the small service provider exemption under Notification No. 33/2012-ST dated June 20, 2012.
The bench of Binu Tamta (Judicial Member), and P.V. Subba Rao (Technical Member) found that there was no evidence of taxable service turnover in the preceding financial year and therefore the exemption could not be denied merely because the assessee had not separately produced other turnover records.
The appellant/assessee was engaged in providing services but was not registered with the Service Tax Department. The department initiated an investigation after receiving information from the Income Tax Department in the form of the assessee’s Form 26AS.
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During the investigation, the assessee was repeatedly asked to provide documents including income-tax returns, Form 26AS, VAT/Sales Tax returns, bank statements, contracts and balance sheets. According to the department, these documents were not furnished. The authorities consequently relied upon the information available with them and issued a show cause notice dated April 22, 2019.
The show cause notice proposed a service tax demand of ₹1,75,874 under the proviso to Section 73(1) of the Finance Act, 1994, along with applicable interest under Section 75 and penalties under Sections 77 and 78.
The Deputy Commissioner, however, did not confirm the entire proposed demand. After considering the material available on record, the authority confirmed service tax of ₹74,909, corresponding to a taxable value of ₹6,06,061received by the appellant during the financial year 2013-14. The Commissioner (Appeals) subsequently upheld the order, prompting the assessee to approach CESTAT.
A significant part of the proceedings arose from the figures appearing in Form 26AS.
The assessee pointed out that a client, M/s SR Enterprises, had erroneously reported ₹12,36,822 as having been paid to the appellant for FY 2013-14. According to the appellant, the amount had actually been paid to another person.
The client subsequently revised its TDS returns, resulting in the disputed amount being removed from the appellant’s Form 26AS. A revised Form 26AS was thereafter generated. The lower authority took this revised information into account and reduced the original proposed demand, ultimately confirming service tax only on taxable receipts of ₹6,06,061.
The principal question before the Tribunal was whether the appellant could claim the benefit of Notification No. 33/2012-ST, which granted exemption to small service providers where the value of taxable services remained within the prescribed threshold.
The appellant argued that the notification exempted taxable services up to ₹10 lakh during a financial year. Since the taxable service value determined by the department for FY 2013-14 was only ₹6,06,061, the appellant contended that no service tax was payable.
The department opposed the claim on the ground that the exemption was subject to conditions. In particular, condition 2(viii) of the notification required that the aggregate value of taxable services rendered by the service provider from one or more premises should not exceed ₹10 lakh in the preceding financial year.
According to the departmental representative, the appellant had failed to provide evidence or details concerning turnover for FY 2012-13. Therefore, the lower authorities were justified in refusing to extend the exemption for FY 2013-14.
The appellant’s counsel countered that the very document relied upon by the department—Form 26AS—supported the assessee’s case.
The Form 26AS for FY 2012-13, which was placed on record, showed that there were no payments at all to the appellant during that financial year. On that basis, the assessee argued that its taxable turnover for the preceding year was nil.
Therefore, according to the appellant, the condition contained in Notification No. 33/2012-ST was satisfied and the exemption should be available for FY 2013-14.
The Tribunal accepted the assessee’s contention.
CESTAT observed that there was nothing on record to establish that the appellant had rendered taxable services during FY 2012-13. Importantly, the Tribunal noted that the department’s entire case was based on amounts reflected as having been paid to the appellant in Form 26AS.
In the absence of any other documentary evidence, the Bench held that the Form 26AS for FY 2012-13 was a reasonable document to rely upon for determining the appellant’s turnover for that year.
The Tribunal consequently concluded that there was no turnover on record for the preceding financial year. This meant that the appellant satisfied the relevant condition for claiming the benefit of Notification No. 33/2012-ST during FY 2013-14.
CESTAT further recorded that the taxable service value for FY 2013-14 was admittedly below ₹10 lakh, having been determined at ₹6,06,061.
Since there was no turnover on record for FY 2012-13 and the taxable service value for FY 2013-14 was below the exemption threshold, the Tribunal held that the appellant was entitled to the benefit of the notification.
The Tribunal therefore found it unnecessary to examine the other submissions raised by the parties, observing that the demand could not survive once the exemption notification was held applicable.
Having concluded that the exemption was available, the Tribunal held that the service tax demand against the appellant could not be sustained.
CESTAT accordingly set aside the service tax demand of ₹74,909, together with the consequential interest and penalties. The impugned order passed by the Commissioner (Appeals) was also set aside and the appeal was allowed with consequential relief.
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