Facts of the Case

The petitioner, Mr. G N Krishna, a PWD contractor, challenged the validity of Order-in-Original No. 59/2025-26 Service Tax dated 28.07.2025 passed by the Additional Commissioner of Central Tax.

The service tax liability against the petitioner had been adjudicated on the basis of inputs received from the Central Board of Direct Taxes and figures appearing in the TDS statement, namely Form 26AS.

The petitioner contended that the nature of services provided by him was required to be examined in the light of Entry 13 of Notification No. 25/2012-ST dated 20.06.2012 and that this aspect had not been properly considered by the adjudicating authority.

The petitioner further relied upon the Karnataka High Court’s earlier order in W.P. No. 11154/2023 and connected petitions, wherein matters involving service tax demands raised primarily by relying upon income-tax returns had been remitted for fresh consideration.

Issues Involved

The principal issues arising for consideration were:

  1. Whether the Order-in-Original determining service tax liability on the basis of CBDT inputs and figures reflected in Form 26AS could be sustained without proper examination of the actual nature and taxability of the services rendered.
  2. Whether the petitioner’s services were required to be examined under Entry 13 of Notification No. 25/2012-ST.
  3. Whether the petitioner qualified within the definition of “service” under Section 65B(44) of the Finance Act, 1994.
  4. Whether the services in question were covered by the negative list.
  5. Whether the services were covered by the exemption list under Notification No. 25/2012-ST or any other applicable notification.
  6. Whether liability to remit service tax arose under Rule 2(1)(d) read with the applicable notification.
  7. Whether the service tax claims or demands were barred by limitation in terms of the law laid down by the Supreme Court.
  8. Whether the principles and directions laid down in W.P. No. 11154/2023 and connected petitions were applicable to the petitioner’s case.

Petitioner’s Arguments

The petitioner submitted that the impugned Order-in-Original was based upon an adjudicated service tax liability derived from inputs received from the Central Board of Direct Taxes and figures appearing in Form 26AS.

It was argued that the services provided by the petitioner had to be specifically examined in the light of Entry 13 of Notification No. 25/2012-ST and that the adjudicating authority had failed to properly take this aspect into consideration.

The petitioner further submitted that the Karnataka High Court had already dealt with cases where service tax adjudication had been completed and demands were raised primarily by relying upon income-tax returns. In W.P. No. 11154/2023 and connected petitions, such matters had been remitted for fresh consideration.

Accordingly, the petitioner sought parity and requested that an identical order be passed in the present case.

Respondent’s Arguments

The learned counsel appearing for the respondent submitted that the petitioner had been heard in the matter during the adjudication proceedings.

However, the Court found that the observations made in W.P. No. 11154/2023 and connected petitions required consideration in the petitioner’s case.

Court’s Findings and Order

The Karnataka High Court referred to its earlier order in W.P. No. 11154/2023 and connected petitions, wherein matters had been remanded to the stage of reply to the show cause notice with specific directions to the concerned officers.

The Court reiterated that the adjudicating officers were required to keep in mind the following issues:

  1. Whether the petitioners do not qualify under Section 65B(44) of the Finance Act, 1994.
  2. Whether the services are covered under the negative list.
  3. Whether the services are covered under the exemption list under Notification No. 25/2012-ST dated 28.06.2012 or under any other applicable notifications.
  4. Whether the person is liable to remit service tax in terms of Rule 2(1)(d) read with the applicable notification.
  5. Whether the claims are barred by limitation in terms of the law laid down by the Supreme Court.

In light of these observations, the High Court set aside the Order-in-Original challenged by Mr. G N Krishna.

The matter was remitted to the stage of reply to the show cause notice.

The authorities were directed to take note of the observations made in the order dated 03.07.2024 passed in W.P. No. 11154/2023 and connected petitions, particularly the observations contained in paragraph 10, insofar as applicable.

All contentions of the parties were expressly kept open.

The petitioner was granted liberty to submit a fresh reply to the show cause notice.

The petitioner was directed to appear before the respondent on 25.05.2026 without waiting for any further notice.

Accordingly, the writ petition was disposed of.

Important Clarification

The High Court did not finally adjudicate the petitioner’s service tax liability on merits.

The Court set aside the Order-in-Original and restored the matter to the stage of reply to the show cause notice so that the competent authority could reconsider the matter after examining the relevant statutory and exemption-related issues.

All contentions of both sides remained open.

The judgment makes it clear that, in the fresh adjudication, the authority must consider, as applicable:

  • the definition of “service” under Section 65B(44) of the Finance Act, 1994;
  • applicability of the negative list;
  • applicability of exemption under Notification No. 25/2012-ST or any other relevant notification;
  • liability under Rule 2(1)(d) read with the applicable notification; and
  • limitation in accordance with the law laid down by the Supreme Court.

The order also reflects the requirement that service tax adjudication involving figures drawn from Form 26AS or income-tax-related material must be reconsidered in the light of the specific statutory and exemption issues identified by the High Court, rather than treating such financial figures as dispensing with examination of the nature and taxability of the underlying services.

Sections Involved

·         Section 65B(44) of the Finance Act, 1994 — Definition of “service”.

·         Rule 2(1)(d) of the Service Tax Rules, 1994 — Relevant for determining the person liable to pay service tax, read with the applicable notification.

·         Notification No. 25/2012-ST — Mega Exemption Notification concerning specified exempt services.

·         Entry 13 of Notification No. 25/2012-ST — Specifically relied upon by the petitioner in relation to the services provided.

·         Negative List Provisions under the Finance Act, 1994 — Required to be examined for determining whether the services were outside the service tax levy.

·         Articles 226 and 227 of the Constitution of India — Constitutional jurisdiction invoked for challenging the Order-in-Original.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1783504264_1476compressed.pdf

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