2026-VIL-337-CESTAT-ALH-ST
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SERVICE TAX CESTAT Cases

Service Tax - Exemption for Government Construction Projects, Evidentiary Value of Form 26AS - Appellant is engaged in constructing roads and canals for Government and local authorities, claimed exemption under Serial Nos. 12(d) and 13(a) of Notification No. 25/2012-ST - Adjudicating authority confirmed a service tax based on receipts reflected in Form 26AS - Whether service tax can be levied on receipts shown in Form 26AS by disregarding the exempt nature of the underlying services merely because the work orders were initiated in a prior financial year - HELD - The authorities below admitted the services involved road and canal construction for government bodies, which are unconditionally exempt under the Mega Exemption Notification. The Revenue proceeded solely on the basis of third-party Income Tax data without examining whether the services were taxable or exempt, and failed to appreciate that the receipts in FY 2015-17 were payments for exempt work orders executed previously. Since the appellant provided a detailed reconciliation linking the payments to specific exempt projects, such as the construction of metalled roads, the demand based on the timing of receipts as per Form 26AS is legally flawed as it ignores the statutory exemption granted to the nature of the activity - Since the demand on merits is set aside due to the availability of statutory exemptions, the consequential penalties and interest cannot survive – Further, there are ingredients of suppression or willful misstatement with intent to evade tax, particularly as the appellant operated under a bona fide belief that their Government-contracted infrastructure work was exempt from tax. Consequently, the invocation of penal provisions and the demand for interest and late fees are held to be unjustified – The impugned order is set aside and the appeal is allowed
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