2026-VIL-516-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax demand based on financial records obtained from the Registrar of Companies - Whether the tax demand and penalties imposed on the appellant based solely on the financial statements, without proper identification of the taxable services, service recipients, and consideration received, are justified - HELD - The department had not made any efforts to identify the specific taxable services, service recipients, and corresponding consideration, and had instead resorted to estimation and extrapolation based on the financial statements. The high rates of growth applied to determine the tax liability, such as 490%, 250%, and 270% for certain years, appeared prima facie improbable – the appellants did not cooperate with the investigation have not filed any reply to the SCN and did not attend the personal hearing also. However, the same does not give any license to the authorities to fasten a tax demand of humungous proportions without identifying the service provided, the client and the consideration received - the fundamental principle of audi alteram partem (hear the other party) has not been followed by the ld. adjudicating authority; rather he was not in a position to follow the same as the appellants did not join the investigation. It would be a travesty of justice to confirm the tax demand as the Revenue, being the one who is making allegations, has not discharged their burden to prove the tax evasion along with evidence - The appellant is directed to submit its written reply and relevant documents in its defense, and the adjudicating authority to consider the same and pass a fresh order – The appeal is allowed by remand
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