Facts of the Case

The petitioner, Mr. G. N. Krishna, challenged the Order-in-Original dated 28.07.2025, whereby service tax demand had been confirmed primarily on the basis of information received from the Central Board of Direct Taxes (CBDT) and figures reflected in Form 26AS (TDS Statements).

The petitioner contended that the adjudicating authority failed to properly examine whether the services rendered were exempt under Entry 13 of Notification No. 25/2012-ST dated 20.06.2012. The petitioner also relied upon an earlier Karnataka High Court judgment in W.P. No.11154/2023 and connected matters, where similar service tax demands based on income tax records had been remanded for fresh consideration.

Issues Involved

  1. Whether service tax demand can be sustained merely on the basis of figures appearing in Form 26AS and information received from the Income Tax Department.
  2. Whether the adjudicating authority failed to examine the applicability of Entry 13 of Notification No. 25/2012-ST granting exemption from service tax.
  3. Whether the Order-in-Original deserved to be set aside in light of the Karnataka High Court's earlier decision directing fresh adjudication in similar cases.
  4. Whether all statutory issues including taxability, exemptions, limitation, and liability required fresh examination before confirming the demand.

Petitioner's Arguments

  • The impugned service tax demand had been confirmed solely on the basis of Form 26AS and information obtained from the CBDT.
  • The adjudicating authority failed to properly consider whether the services rendered by the petitioner were covered under Entry 13 of Notification No. 25/2012-ST, which grants exemption from service tax.
  • Similar matters had already been considered by the Karnataka High Court in W.P. No.11154/2023 and connected petitions, where Orders-in-Original were set aside and matters remanded for fresh adjudication.
  • Therefore, on the principle of parity, the petitioner sought identical relief.

Respondent's Arguments

  • The Revenue submitted that the petitioner had been afforded an opportunity of hearing before passing the Order-in-Original.
  • However, it was acknowledged that the observations made by the Karnataka High Court in W.P. No.11154/2023 and connected matters required consideration while deciding the present dispute.

Court Order / Findings

The Karnataka High Court allowed the writ petition and held that the principles laid down in its earlier decision were squarely applicable.

Accordingly, the Court:

  • Set aside the Order-in-Original dated 28.07.2025.
  • Remitted the matter to the stage of reply to the Show Cause Notice.
  • Directed the adjudicating authority to reconsider the matter keeping in view the observations made in W.P. No.11154/2023, particularly regarding:
    • Whether the activity falls within Section 65B(44) of the Finance Act, 1994.
    • Whether the services fall under the Negative List.
    • Whether exemption is available under Notification No.25/2012-ST or any other applicable notification.
    • Whether liability exists under Rule 2(1)(d) of the Service Tax Rules.
    • Whether the demand is barred by limitation.

The Court further clarified that:

  • All contentions of both parties remain open.
  • The petitioner is at liberty to file a fresh reply to the Show Cause Notice.
  • The petitioner shall appear before the respondent authority on 25.05.2026 without awaiting any further notice.

Important Clarification

The Karnataka High Court reiterated that:

  • Service tax demands based merely on Income Tax records or Form 26AS require independent examination under the provisions of the Finance Act, 1994.
  • Authorities must verify exemption notifications, taxability of services, reverse charge liability, and limitation before confirming any demand.
  • The Court did not decide the merits of the tax liability and left every issue open for fresh adjudication.
  • The adjudicating authority must conduct a fresh and reasoned examination in accordance with law.

Sections / Provisions Involved

  • Section 65B(44), Finance Act, 1994
  • Rule 2(1)(d), Service Tax Rules, 1994
  • Notification No. 25/2012-ST dated 20.06.2012
  • Articles 226 & 227 of the Constitution of India

Relevant Sections Involved:

  • Section 65B(44) of the Finance Act, 1994
  • Rule 2(1)(d) of the Service Tax Rules, 1994
  • Notification No. 25/2012-ST dated 20.06.2012 (Mega Exemption Notification)
  • Articles 226 & 227 of the Constitution of India

Link to Download the Order https://mytaxexpert.co.in/uploads/1784874614_1942compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.