2026-VIL-1736-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Demand for period up to 30.06.2012 – Non-classification of service under sub-clauses of clause (105) of Section 65 of the Finance Act, 1994 – Appellant carrying on business as mechanical, civil and refractory contractor, was registered for three taxable services and filed ST-3 Returns - Department compared gross receipts in audited Balance Sheets and Form 26AS with the taxable value declared in the returns, treated the entire difference as suppressed value and issued a show cause notice, which was confirmed in adjudication along with interest and penalties – Whether a demand raised without classifying the service under a specific sub-clause of Section 65 is sustainable – HELD – In the positive list regime existing up to 30.06.2012, it is mandatory to classify the service under the specific sub-clauses of clause (105) of Section 65. The annexure to the notice merely aggregates job contract bills, labour contract and machine hire charges appearing in the Balance Sheet, deducts the value declared in the ST-3 Returns and taxes the difference, without classifying the service rendered under a particular sub-clause. In the absence of classification, the Appellant is denied the opportunity of demonstrating whether it is liable to service tax at all. A notice which does not disclose the charge and the correct classification of the service is not a notice in the eye of law. The issue is no longer res integra, as it has been held that where the notice and the adjudication order are vague as to the taxable service, the demand is not sustainable and no demand can be confirmed unless the person concerned is put on notice of the exact liability – Demand of service tax confirmed for the period prior to 30.06.2012 is not sustainable and is set aside - Service Tax – Demand for period from 01.07.2012 – Negative list regime – Non-invocation of Section 66B of the Finance Act, 1994 – Show cause notice issued after introduction of the negative list described the demand by reference to the erstwhile positive list categories and invoked only Sections 66, 67, 68, 69 and 70, with the impugned order also confirming violation of Sections 66, 67, 68 and 70 – Whether a demand for the period after 01.07.2012 is sustainable when the charging provision, Section 66B, has not been invoked in the notice – HELD – With effect from 01.07.2012, service tax is leviable on the basis of the negative list, and Section 66B became the charging section for levying service tax on the value of all services other than those specified in the negative list. The provisions of Section 66B must therefore be invoked for such a demand, which has not been done in the notice. A demand cannot be sustained upon repealed or inapplicable provisions, and the notice did not put the Appellant on notice of the provisions applicable for the period after 01.07.2012. Findings traversing beyond the scope of the show cause notice are unsustainable. A defective show cause notice cannot be cured by giving a finding in the impugned order by the adjudicating authority. As the notice has not specified the category for the period prior to 30.06.2012 and has not invoked Section 66B for the period after 01.07.2012, the entire demand is legally unsustainable on this ground itself, and there is no need to go into the merits of the demands – Demand for the period after 01.07.2012 is not sustainable and the order is set aside - Service Tax – Extended period of limitation – Proviso to Section 73(1) of the Finance Act, 1994 – Demand founded solely on the difference between value declared in ST-3 Returns and gross receipts in Balance Sheets and Form 26AS – Notice invoking the extended period was issued against the Appellant, a registered assessee who filed ST-3 Returns throughout the period and paid service tax, without any enquiry from service recipients or examination of work orders, invoices or agreements – Whether the extended period of limitation can be invoked where the demand rests only on a comparison of returns with Balance Sheets and Form 26AS – HELD – Audited Balance Sheets are statutory documents and Form 26AS is generated from the records of the Department's own sister wing, and nothing was concealed. The Appellant was a registered assessee, filed ST-3 Returns and paid service tax during the period. The impugned order records no evidence of intent to evade at all. Where the demand is raised on the basis of Form 26AS or third-party income tax data without investigation at the Appellant's end or independent verification, the demand is unsustainable and the extended period of limitation is not invocable, as consistently held by the Tribunal – Demand of service tax confirmed by invoking the extended period of limitation is not sustainable - Service Tax – Interest and penalty – Sections 75, 77 and 78 of the Finance Act, 1994 and late fee under Rule 7C of the Service Tax Rules, 1994 – Confirmation of interest, penalties and late fee along with the demand of service tax – Whether interest and penalties survive when the demand of service tax is not sustained – HELD – As the demand of service tax is not sustained, the question of demanding interest or imposing penalty does not arise – Interest and penalties are set aside, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law.
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