CESTAT Kolkata Sets Aside Service Tax Demand Based Solely on CBDT Data

Nanu Shome & Co. Vs Commissioner of C.G.S.T. and Central Excise (CESTAT Kolkata)

M/s. Nanu Shome & Co. challenged Order-in-Original No. 60/COMM/ST/SLG/23-24 dated 28.03.2024, whereby the Commissioner, Siliguri Central Excise and C.G.S.T. Commissionerate confirmed Service Tax demand of Rs.2,86,48,709/- inclusive of cesses for the period April 2015 to March 2017, along with interest. A penalty equal to the Service Tax demand was imposed under Section 78 of the Finance Act, 1994, besides penalty of Rs.10,000/- under Section 77(1)(c) and late fee of Rs.80,000/- for non-filing of ST-3 Returns under Section 70 read with Rule 7(C) of the Service Tax Rules, 1994.

The appellant was engaged in providing works contract services relating to construction of civil structures, roads, river embankments and canals for irrigation-related works to local authorities and government bodies. The appellant stated that it was under a bona fide belief that its services were exempt from Service Tax under Notification No. 25/2012-S.T. dated 20.06.2012, as amended by Notification No. 09/2016-S.T. dated 01.03.2016, and therefore had not obtained Service Tax registration or filed Service Tax Returns.

The Department initiated proceedings on the basis of Form 26AS data received from the Income Tax Department. After seeking information by e-mail dated 16.04.2021 and letter dated 21.04.2021, the Department issued the Show Cause Notice on 28.04.2021, without waiting for the appellant’s response to the latter communication. The demand was based on the information contained in Form 26AS.

The appellant submitted that the receipts reflected in Form 26AS were from government bodies and local authorities and that the services were therefore exempt. It also contended that the Department had neither independently verified the nature of the services nor produced corroborative evidence establishing taxable services. The appellant further submitted that pre-Show Cause Notice consultation was mandatory for demands exceeding Rs.50 lakhs under the Board’s Instruction dated 21.12.2015 and Circular dated 10.03.2017, but no such consultation had taken place.

The Revenue reiterated the findings in the impugned order and sought dismissal of the appeal.

CESTAT Kolkata found that the Show Cause Notice had been issued solely on the basis of CBDT/Form 26AS data and that the Revenue had not conducted independent verification or enquiry into the nature of services before issuing the notice. Relying upon the decisions referred to in the order, the Tribunal held that a Service Tax demand based solely on Form 26AS data without independent verification was not sustainable.

On merits, the Tribunal noted that the 26AS statements showed receipts from various government bodies or local authorities. Although the appellant could not produce work orders relating to the claimed services, neither the Show Cause Notice nor the Order-in-Original produced evidence establishing that the appellant had rendered services to another person for which the claimed exemption was unavailable. The Tribunal also noted that the adjudicating authority had found that the works rendered were related to construction of civil structures and other original works in relation to roads and irrigation-related work to government bodies, local authorities or governmental authorities, which were exempt under the cited notifications. The Tribunal therefore held that the Revenue had failed to substantiate the allegation of taxable, non-exempt services with corroborative evidence.

The Tribunal additionally found that mandatory pre-Show Cause Notice consultation had not been conducted despite the demand exceeding Rs.50 lakhs. It considered the later Circular No.1079/03/2021-CX dated 11.11.2021, which made such consultation non-mandatory for specified suppression-related cases, and agreed with the appellant’s submission that the later circular was prospective in the circumstances of the case, the Show Cause Notice having been issued on 28.04.2021.

CESTAT Kolkata accordingly held that the Service Tax demand was legally unsustainable. The demand, interest, penalties and late fee were set aside, the impugned order was set aside, and the appeal was allowed with consequential relief, if any, as per law.

Background of the Service Tax Demand

M/s. Nanu Shome & Co. was engaged in providing works contract services relating to construction of civil structures, construction of roads, river embankments and canals for irrigation-related works to various local authorities and government bodies.

The firm had Mr. Sandeep Shome and Mrs. Nanu Shome as partners. After the death of Mr. Sandeep Shome on 23.04.2023, Mrs. Nanu Shome became the sole owner of the firm. According to the appellant, the firm stopped functioning after Mr. Sandeep Shome’s death.

The appellant stated that it believed its services were exempt from Service Tax by virtue of Notification No. 25/2012-S.T. dated 20.06.2012, as amended by Notification No. 09/2016-S.T. dated 01.03.2016. On that basis, it did not obtain Service Tax registration or file Service Tax Returns.

Show Cause Notice Based on Form 26AS Data

The Department received data from the Central Board of Direct Taxes through Form 26AS. An e-mail seeking information was sent to the appellant on 16.04.2021, followed by another letter dated 21.04.2021 seeking documents.

On 28.04.2021, the Department issued the Show Cause Notice demanding Service Tax of Rs.2,86,48,709/- inclusive of cesses for Financial Years 2015-16 and 2016-17, together with interest and penalties, based on the Form 26AS information received from the Income Tax Department.

The demand was subsequently confirmed through Order-in-Original No. 60/COMM/ST/SLG/23-24 dated 28.03.2024.

Appellant’s Submissions

Services Claimed to Be Exempt Works Contract Services

The appellant submitted that its services were works contract services relating to construction of civil structures and other original works connected with roads and irrigation-related work undertaken for government bodies, local authorities and governmental authorities.

It relied upon Notification No. 25/2012-S.T. dated 20.06.2012, as amended by Notification No. 09/2016-S.T. dated 01.03.2016, and pointed out that the Form 26AS data itself identified receipts from entities including the Executive Engineer PWD Jalpaiguri Division, Member Secretary Uttarbanga Unnayan Parshad and the Office of the Executive Engineer, Teesta Left Bank Division.

Challenge to Reliance Solely on CBDT Data

The appellant submitted that the demand was raised solely on the basis of information received from the Income Tax Department, without corroborative evidence or independent enquiry into the nature of services rendered and the corresponding Service Tax liability.

It relied upon decisions including M/s. Tabassum Enterprises v Commissioner of CGST&CX, M/s. Rishu Enterprise v. Commissioner of C.G.S.T. & C.Ex., Dibrugarh, M/s. Quest Engineers & Consultant Pvt. Ltd. v. Commissioner of C.G.S.T. & C.Ex., Allahabad, M/s. Gopi Chenna v. Commissioner of Central Tax, Medchal – GST, M/s. Indian Machine Tools Manufacturers Association v. The Commissioner of C.Ex., Panchkula and M/s. Forward Resources Pvt. Ltd. v. Commissioner of C.Ex. & S.T., Surat-I.

Challenge Based on Pre-Show Cause Notice Consultation

The appellant further submitted that Board’s Instruction under F. No. 1080/09/DLA/MIS/15 dated 21.12.2015 and subsequent clarificatory Circular issued vide F No. 1053/02/2017-CX dated 10.03.2017 made pre-Show Cause Notice consultation mandatory where the demand exceeded Rs.50 lakhs.

Since the demand in the present case was Rs.2.86 crore, the appellant contended that the Department was required to conduct such consultation before issuing the Show Cause Notice. According to the appellant, no such consultation was conducted.

The appellant also referred to Circular No.1079/03/2021-CX dated 11.11.2021, which made pre-Show Cause Notice consultation non-mandatory for specified suppression-related cases. It submitted that this later circular could not apply to the Show Cause Notice dated 28.04.2021 and relied upon Suchitra Components v Commissioner of C.Ex., Guntur [2007 (208) E.L.T. 321 (S.C.)].

Revenue’s Submissions

The Ld. Authorized Representative for the Revenue reiterated the findings contained in the impugned order and prayed for rejection of the appeal.

CESTAT Kolkata’s Findings on CBDT Data

The Tribunal found that the Revenue had issued the Show Cause Notice demanding Service Tax on the basis of data received from the Income Tax Department.

It noted that an e-mail dated 16.04.2021 had been sent seeking documents and another letter dated 21.04.2021 had also been issued. However, the Show Cause Notice was issued on 28.04.2021 without waiting for the appellant to submit the documents sought through the latter communication.

The Tribunal found that the Show Cause Notice was issued solely on the basis of Form 26AS data and that the Revenue had not independently enquired into the nature of services rendered before issuing the notice.

No Independent Verification of Taxable Services

The Tribunal held that the demand had been raised solely on the basis of CBDT data without independent verification. It agreed with the appellant that a Show Cause Notice issued merely on the basis of data received from the Income Tax Department, without conducting an independent enquiry, was legally unsustainable for levy of Service Tax.

Relying upon the cited decisions, the Tribunal held that the demand confirmed in the impugned order solely on the basis of CBDT data, without independent verification to ascertain the nature of services rendered, was not sustainable.

Findings on the Claimed Exemption

The Tribunal considered the appellant’s claim that it had rendered works contract services relating to construction of roads and irrigation-related works for various local authorities and government bodies.

The appellant could not produce work orders relating to its claim of rendering services to government bodies and/or local authorities. However, the Tribunal examined the Form 26AS statement submitted by the appellant and noted receipts from the following organisations/entities:

• Executive Engineer PWD, Jalpaiguri Division
• Member Secretary Uttarbanga Unnayan Parshad (UUP)
• Office of the Executive Engineer, Teesta Left Bank Division
• Siliguri Irrigation Division
• Siliguri Jalpaiguri Development Authority, Siliguri
• Executive Engineer, Alipurduar Division, P W Directorate
• Office of the Executive Engineer, Cooch Behar Highway Division
• West Bengal State Rural Development Agency (WBSRDA), Purba Medinipur Division
• West Bengal State Rural Development Agency (WBSRDA), Siliguri
• West Bengal State Rural Development Agency (WBSRDA), Uttar Dinajpur

The Tribunal observed that the receipts indicated that the appellant had received amounts from government bodies or local authorities, as the case may be.

It further observed that neither the Show Cause Notice nor the Order-in-Original had produced evidence substantiating the allegation that the appellant rendered services to any other person for which the claimed exemption was unavailable.

The Tribunal noted that the adjudicating authority had found that the works rendered by the appellant related to construction of civil structures and other original works concerning roads and irrigation-related work for government bodies, local authorities and governmental authorities, and that such works were exempt under Notification No. 25/2012-S.T. dated 20.06.2012, as amended by Notification No. 09/2016-S.T. dated 01.03.2016.

In these circumstances, the Tribunal found no merit in the Revenue’s contention that the appellant had rendered taxable services which were not eligible for the benefit of the exemption. It held that the Revenue had failed to substantiate the allegation of rendering taxable, non-exempt services with corroborative evidence.

Pre-Show Cause Notice Consultation

The Tribunal also examined the requirement of pre-Show Cause Notice consultation under the Board’s Instruction under F. No. 1080/09/DLA/MIS/15 dated 21.12.2015 and subsequent clarificatory Circular issued vide F No. 1053/02/2017-CX dated 10.03.2017.

It found that pre-Show Cause Notice consultation with the Principal Commissioner or Commissioner was mandatory before issuance of Show Cause Notices in cases where the demand exceeded Rs.50 lakhs, subject to the applicable exclusions.

In the present case, the demand exceeded Rs.50 lakhs. Nevertheless, the Department did not conduct the required pre-Show Cause Notice consultation. The Tribunal also noted that the Department issued a letter on 21.04.2021 and then issued the Show Cause Notice on 28.04.2021 without waiting for the appellant’s reply.

The Tribunal therefore held that the mandatory instruction contained in the Board’s Circular had not been followed and that the Show Cause Notice issued without following the prescribed consultation was legally unsustainable.

Effect of Circular No.1079/03/2021-CX

The Tribunal took note of Circular No.1079/03/2021-CX dated 11.11.2021, under which pre-Show Cause Notice consultation was made non-mandatory for specified suppression-related cases.

However, the Show Cause Notice in the present case was issued on 28.04.2021, before the later circular. The Tribunal agreed with the appellant’s submission that the later circular was prospective in the circumstances and referred to Suchitra Components v Commissioner of C.Ex., Guntur [2007 (208) E.L.T. 321 (S.C.)].

The Tribunal also relied upon its decision in M/s. SIS Limited v Pr. Commissioner of C.G.S.T. and Central Excise, where the issue of the two Board Circulars and the requirement of pre-consultation had been examined.

Final Decision

CESTAT Kolkata held that the Service Tax demand confirmed through the impugned order was not sustainable.

The Tribunal reached this conclusion on the basis that the demand was raised solely from CBDT/Form 26AS data without independent verification, the Revenue had failed to substantiate with corroborative evidence that the appellant rendered taxable services outside the claimed exemption, and the mandatory pre-Show Cause Notice consultation had not been followed.

As the Service Tax demand did not survive, the Tribunal held that the question of demanding interest or imposing penalty under Section 78 of the Finance Act, 1994 did not arise.

The Tribunal further held that there was no Service Tax liability on the appellant in the case and therefore agreed that there was no need to take registration or file returns. It accordingly found no justification for the penalty under Section 77(1)(c) of the Finance Act, 1994 or the late fee under Rule 7(C) of the Service Tax Rules, 1994.

The impugned order was set aside and the appeal was allowed with consequential relief, if any, as per law. The order was pronounced in the open court on 20.01.2026.

Cases Discussed

• M/s. Tabassum Enterprises v Commissioner of CGST&CX — [Final Order No. 77452/2025 dated 19.09.2025 in Service Tax Appeal No. 75037 of 2025 – CESTAT, Kolkata].
• M/s. SIS Limited v Pr. Commissioner of C.G.S.T. and Central Excise — [Final Order No. 77549 of 2025 dated 15.10.2025 in Service Tax Appeal No. 75555 of 2024 – CESTAT, Kolkata].
• M/s. Jay Mahakali Industrial Service v Union of India — [(2025) 29 Centax 353(Guj)].
• M/s. Ravray Construction v Add. Commissioner, CGST&CE, Vadodara-I — [(2025)34 Centax 290(Guj)].
• M/s. Gopi Chenna v. Commissioner of Central Tax, Medchal – GST — [Final Order No. A/30078¬30079/2024 dated 26.02.2024 in Service Tax Appeal No. 30412 of 2023 & anr. – CESTAT, Hyderabad].
• M/s. Indian Machine Tools Manufacturers Association v. The Commissioner of C.Ex., Panchkula — [Final Order No. 60403 of 2023 dated 18.09.2023 in Service Tax Appeal No. 4174 of 2012 – CESTAT, Chandigarh].
• M/s. Forward Resources Pvt. Ltd. v. Commissioner of C.Ex. & S.T., Surat-I — [2023 (69) G.S.T.L. 76 (Tri. – Ahmd.)].
• M/s. Rishu Enterprise v. Commissioner of C.G.S.T. & C.Ex., Dibrugarh — [Service Tax Appeal No.75509 of 2022 – CESTAT, Kolkata].
• M/s. Quest Engineers & Consultant Pvt. Ltd. v. Commissioner of C.G.S.T. & C.Ex., Allahabad — [2022 (58) G.S.T.L. 345 (Tri-All)].
• Suchitra Components v Commissioner of C.Ex., Guntur — [2007 (208) E.L.T. 321 (S.C.)].
• L AND T Hydrocarbon Engineering Ltd. v. Union of India — [2022 (4) TMI 70].
• Amadeus India Pvt Ltd v. Principal Commissioner — [2019-TIOL-1027-HC-DEL-ST].
• M/s. SIS Limited v Pr. Commissioner of C.G.S.T. and Central Excise — [Final Order No. 77549 of 2025 dated 15.10.2025 in Service Tax Appeal No. 75555 of 2024 – CESTAT, Kolkata].

FULL TEXT OF THE CESTAT KOLKATA ORDER

The present appeal has been filed challenging the Order-in-Original No. 60/COMM/ST/SLG/23-24 dated 28.03.2024 passed by the Commissioner, Siliguri Central Excise and C.G.S.T. Commissionerate wherein the demand of Service Tax amounting to Rs.2,86,48,709/- (inclusive of cesses) for the period from April 2015 to March 2017 has been confirmed, along with interest. A penalty equal to the above Service Tax demand confirmed has also been imposed by the ld. adjudicating authority under Section 78 of the Finance Act, 1994; penalty of Rs.10,000/- under Section 77(1)(c) of the Act and late fee of Rs.80,000/-on account of non-filing of ST-3 Returns under Section 70 of the Act read with Rule 7(C) of the Service Tax Rules, 1994 have also been imposed.

2. The facts of the case are that M/s. Nanu Shome & Co. (hereinafter referred to as the “appellant”), is a firm engaged in the business of providing works contract services relating to construction of civil structures, construction of road, river embankment, canal for irrigation related works, etc., to various local authorities and government bodies. The appellant-firm had Mr. Sandeep Shome and Mrs. Nanu Shome as partners. After the death of Mr. Sandeep Shome on 23.04.2023, his wife, Mrs. Nanu Shome, became the sole owner of the firm. As per the appellant, the said firm stopped functioning after the death of Mr. Sandeep Shome.

2.1. As per the appellant, they were under the bona fide belief that the services provided by them were exempted from levy of Service Tax by virtue of Notification No. 25/2012-S.T. dated 20.06.2012 as amended by Notification No. 09/2016-S.T. dated 01.03.2016. Therefore, the appellant did not take registration with the Department and did not file any Service Tax Returns, since they were of the view that no registration was required as the services provided by them were exempted from payment of Service Tax.

3. On the basis of the data received from Central Board of Direct Taxes (C.B.D.T.), i.e., as per Form 26AS received from the Income Tax Department, the Department sought some information from the appellant by sending an e-mail on 16.04.2021. Subsequently, another letter dated 21.04.2021 was also issued, seeking documents.

4. Thereafter, on 28.04.2021, a Show Cause Notice was issued to the appellant wherein Service Tax amounting to Rs.2,86,48,709/- (inclusive of cesses), has been demanded along with interest and penalties, for the Financial Years 2015-16 to 2016-17, on the basis of the information available in Form 26AS data collected from the C.B.D.T.

4.1. The said Notice came to be adjudicated vide the impugned order dated 28.03.2024 whereby the demand of Service Tax, as proposed in the said Notice, has been confirmed, along with interest and penalties thereon.

4.2. Aggrieved by the confirmation of the above demand of Service Tax, along with interest, and imposition of penalties, the appellant has filed the instant appeal.

5. The Ld. Counsel appearing on behalf of the appellant submits that all the services rendered by the appellant were in the nature of ‘works contract service’ relating to construction of civil structures and other original works in relation to road and irrigation related work, to government bodies / local authorities / governmental authorities. It is his submission that the said services were exempted vide Notification No. 25/2012-S.T. dated 20.06.2012 as amended by Notification No. 09/2016-S.T. dated 01.03.2016; he points out that the same is evident from the 26AS statement relied upon by the Department wherein it has been categorically mentioned that the amounts were received from “Executive Engineer PWD Jalpaiguri Division”, “Member Secretary Uttarbanga Unnayan Parshad (UUP)”, “Office of the Executive Engineer, Teesta Left Bank Division”, etc. Thus, it is the appellant’s stand that the information received from the Income Tax Department itself indicates that all the activities undertaken by them were to government and/or local bodies, which are exempted from payment of Service Tax by way of the above said Notifications; however, the entire demand of service tax made in the Show Cause Notice has been issued solely on the basis of data received from CBDT [i.e. 26AS data], without adducing any corroborative evidence or without conducting any independent enquiry therefor, which is arbitrary and untenable. Thus, the appellant submits that the demand confirmed on the basis of unverified data from the Income tax Department is not sustainable. In support of this contention, the appellant relies on the following judicial pronouncements: –

i. M/s. Tabassum Enterprises v Commissioner of CGST&CX [Final Order No. 77452/2025 dated 19.09.2025]

ii. M/s. Rishu Enterprise v. Commissioner of C.G.S.T. & C.Ex., Dibrugarh [Service Tax Appeal No.75509 of 2022 – CESTAT, Kolkata].

iii. M/s. Quest Engineers & Consultant Pvt. Ltd. v. Commissioner of C.G.S.T. & C.Ex., Allahabad [2022 (58) G.S.T.L. 345 (Tri-All)]

iv. M/s. Gopi Chenna v. Commissioner of Central Tax, Medchal – GST [Final Order No. A/30078­30079/2024 dated 26.02.2024 in Service Tax Appeal No. 30412 of 2023 & anr. – CESTAT, Hyderabad]

v. M/s. Indian Machine Tools Manufacturers Association v. The Commissioner of C.Ex., Panchkula [Final Order No. 60403 of 2023 dated 18.09.2023 in Service Tax Appeal No. 4174 of 2012 – CESTAT, Chandigarh]

vi. M/s. Forward Resources Pvt. Ltd. v. Commissioner of C.Ex. & S.T., Surat-I [2023 (69) G.S.T.L. 76 (Tri. – Ahmd.)]

5.1. It is also argued by the Ld. Counsel for the appellant that the Department has in fact issued the Show Cause Notice without verifying the actual nature of services rendered and liability of Service Tax on the same, if any; as the evidences available on record indicate that the services rendered by the appellant are exempted from payment of service tax, it is the submission of the appellant that the Show Cause Notice itself should not have been issued demanding Service Tax.

5.2. Further, the Ld. Counsel for the appellant also pointed out that as per the Board’s instruction under F. No. 1080/09/DLA/MIS/15 dated 21.12.2015 and subsequent clarificatory Circular issued vide F No. 1053/02/2017-CX dated 10.03.2017, a Pre-Show Cause Notice consultation was mandatory prior to issuance of Show Cause Notice where the demand of service tax was above Rs.50,00,000/- (Rupees Fifty Lakhs); that in the present case, the service tax demand has been worked out as Rs. 2.86 crore, but, in spite of that, no pre-Show Cause Notice consultation as mandated under the aforesaid Circular / Instruction was conducted by the department. In this regard, reliance has been placed on the following decisions wherein it has been held that pre-Show Cause Notice consultation is mandatory: –

i. M/s. Jay Mahakali Industrial Service v Union of India [(2025) 29 Centax 353(Guj)]

ii. M/s. Ravray Construction v Add. Commissioner, CGST&CE, Vadodara-I [(2025)34 Centax 290(Guj)]

iii. M/s. SIS Limited v Pr. Commissioner of C.G.S.T. and Central Excise [CESTAT Kolkata Final Order No. 77549/2025 dated 15.10.2025].

5.2.1. In this context, it has also been pointed out by the Ld. Counsel for the appellant that such Pre-Show Cause Notice consultation was made non-mandatory for suppression related cases vide Circular No.1079/03/2021-CX dated 11.11.2021. However, it is the submission of the Ld. Counsel for the appellant in this regard that the revised Circular has no applicability in this case as the instant Show Cause Notice was issued on 28.04.2021, which is prior to the date of issue of the revised Circular; it is submitted that oppressive circulars would be applicable prospectively, therefore, the circular dated 11.11.2021, being oppressive in nature would be applicable prospectively, i.e., from 11.11.2021 only, as held by the Hon’ble Apex Court in the case of Suchitra Components v Commissioner of C.Ex., Guntur [2007 (208) E.L.T. 321 (S.C.)].

5.2.2. As the mandatory requirement of pre- Show Cause Notice consultation has not been followed in this case, it is the appellant’s contention that the proceedings culminating from the Show Cause Notice in question are unsustainable.

5.3. In view of the above submissions, the Ld. Counsel for the appellant prays for setting aside the impugned demand confirmed vide the Order-in-Original dated 28.03.2024, along with interest and penalties thereon.

6. On the other hand, the Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order. Accordingly, he prayed for rejection of the instant appeal filed by the appellant.

7. Heard both sides and perused the case records.

8. We find that in the present case, the Revenue has issued the Show Cause Notice demanding Service Tax on the basis of the data received from the Income Tax department. We find that the Revenue has not conducted any independent verification of the nature of the services rendered by the appellant and its Service Tax liability. Evidences available on record indicate that an e-mail dated 16.04.2021 was sent to the appellant seeking some documents. Subsequently, another later dated 21.04.2021 was also sent seeking documents. However, without waiting for the appellant to submit any document, the impugned Show Cause Notice was issued on 28.04.2021, i.e., within a week from the letter dated 21.04.2021, solely on the basis of the data available in Form 26AS received from the Income Tax department. We find that the Revenue has not conducted any independent enquiry to ascertain the nature of services rendered, prior to issue of the Notice.

8.1. A perusal of the said Show Cause Notice clearly reveals that the demand has been raised solely on the basis of the CBDT data, without any independent verification being conducted. For the sake of ready reference, paragraph 2.5 of the said Notice, containing the details of the quantification of the demand, is reproduced below: –

“2.5. As per the information received from Income Tax Department, the higher of the amount as per IDS data under Section 194C/194H/1941/194J of the Income Tax Act, 1961 and Income Tax return is taken into consideration as gross amount charged by the said Assessee to their customers, which is as under:

8.2. Thus, we agree with the submission made by the appellant that the Show Cause Notice has been issued merely on the basis of the data received from the Income Tax Department, without conducting any independent enquiry, for levy of Service Tax, which is legally not sustainable.

8.3. We find that a similar view has been taken by the Tribunal in the case of M/s. Tabassum Enterprises v Commissioner of CGST&CX [Final Order No. 77452 of 2025 dated 19.09.2025 in Service Tax Appeal No. 75037 of 2025 – CESTAT, Kolkata]. The relevant portion of the said order reads as under: –

“5. I find that the present demand has been raised and confirmed on the basis of data provided by the Central Board of Direct Taxes (CBDT). It is observed that the said demand has been confirmed without the support of any independent or corroborative evidence from the Service Tax records. Such mechanical reliance on Income Tax data, without verification of the nature of receipts or proof of taxable services rendered, is impermissible in law. It is a settled legal position that mere entries in income tax returns or Form 26AS cannot, by themselves, establish liability under the Finance Act, 1994, unless corroborated by demonstrating rendition of taxable service.”

8.4. The said issue has been examined by the Tribunal in the case of M/s. Rishu Enterprise v. Commissioner of C.G.S.T. & C.Ex., Dibrugarh [Service Tax Appeal No.75509 of 2022 – CESTAT, Kolkata] wherein it has been held as follows: –

“8. In view of the judicial pronouncement of this Tribunal, we hold that merely on the basis of Form 26-AS issued by the Income Tax Department, the demand of Service Tax is not sustainable against the appellant.

…..

11. In view of this, we hold that the impugned demand is not sustainable against the appellant on the basis of the details provided by the Income Tax Department in Form 26AS and the extended period of limitation is not invokable.”

8.5. Further, the same issue has also been dealt with by this Tribunal in the case of M/s. Quest Engineers & Consultant Pvt. Ltd. v. Commissioner of C.G.S.T. & C.Ex., Allahabad [2022 (58) G.S.T.L. 345 (Tri-All)]. The relevant observation of the Tribunal in the aforesaid case is reproduced below: –

“12. …

….We further find that Form No. 26AS is not a statutory document for determining taxable turnover under the Service the Tax provisions. We find that Form No. 26AS is maintained on cash/ receipt basis by the Income Tax Department for the purpose of tax deducted at source, etc. being the relevant data for Income Tax. Whereas under the Service Tax provisions, the service tax is chargeable on mercantile basis (accrual basis) on the service provided whether the value of such service is received or not. Thus, we find that the whole basis of show cause notice is incorrect and/or misconceived.”

8.6. We find that the ratio of the above cited case-laws are squarely applicable to the facts and circumstances of the present case. Accordingly, by applying the ratio of the decisions cited supra, we hold that the demand confirmed in the impugned order, solely on the basis of the CBDT data, without conducting any independent verification to ascertain the nature of the services rendered, is not sustainable. Accordingly, we are of the opinion that the demand of Service Tax confirmed in the impugned order is liable to be set aside on this ground itself.

9. On the merits of the case, we observe that the appellant has been rendering works contract services relating to construction of road, irrigation related works, etc., for various local authorities / government bodies. This is evident from the information furnished by the Income Tax Department vide the 26AS statements. The appellant has claimed exemption from payment of service tax in respect of the said activities undertaken by them under Notification No. 25/2012-S.T. dated 20.06.2012 as amended by Notification No. 09/2016-S.T. dated 01.03.2016. We observe that the appellant could not produce any work order relating to their above claim of rendering services to government bodies and/or local authorities. However, a perusal of the 26AS statement submitted by the appellant clearly reveals that the appellant has received money from the following organisations/entities: –

i. Executive Engineer PWD, Jalpaiguri Division

ii. Member Secretary Uttarbanga Unnayan Parshad (UUP)

iii. Office of the Executive Engineer, Teesta Left Bank Division

iv. Siliguri Irrigation Division

v. Siliguri Jalpaiguri Development Authority, Siliguri

vi. Executive Engineer, Alipurduar Division, P W Directorate

vii. Office of the Executive Engineer, Cooch Behar Highway Division

viii. West Bengal State Rural Development Agency (WBSRDA), Purba Medinipur Division

ix. West Bengal State Rural Development Agency (WBSRDA), Siliguri

x. West Bengal State Rural Development Agency (WBSRDA), Uttar Dinajpur

9.1. The above receipts of money indicate that the appellant has received the said amounts from government bodies or local authorities, as the case may be. In fact, we find that the Show Cause Notice has been issued on the basis of the above said data received from the Income Tax Department. However, neither the Show Cause Notice nor the Order-in-Original has brought in any evidence to substantiate the allegation that the appellant has rendered services to any other person for which the exemption claimed by the appellant is not applicable. From the impugned order, we find that the Ld. adjudicating authority has given the finding that the works rendered by the appellant are related to construction of civil structures and other original works in relation to road and irrigation related work, to government bodies / local authorities / governmental authorities, which were exempted from payment of service tax as provided under Notification No. 25/2012-S.T. dated 20.06.2012 as amended by Notification No. 09/2016-S.T. dated 01.03.2016. In view of the above findings, we do not find any merit in the contention of the Revenue that the appellant has rendered taxable services which are not eligible for the benefit of exemption as provided under Notification No. 25/2012-S.T. dated 20.06.2012 as amended by Notification No. 09/2016-S.T. dated 01.03.2016. As the Revenue has failed to substantiate the allegation of the appellant rendering any taxable services which were not exempted and not discharging Service Tax thereon with corroborative evidence, we hold that the demand of Service Tax confirmed in the impugned order is not sustainable on merits also.

9.2. Thus, in the absence of any corroborative evidence to substantiate the said allegation of non-payment of Service Tax, we hold that the demand of Service Tax confirmed in the impugned order is not legally sustainable and hence, we set aside the same.

10. Further, we take note of the fact that as per the Board’s Instruction vide Board’s instruction under F. No. 1080/09/DLA/MIS/15 dated 21.12.2015 and subsequent clarificatory Circular issued vide F No. 1053/02/2017-CX dated 10.03.2017, a Pre-Show Cause Notice consultation with the Principal Commissioner / Commissioner was mandatory prior to the issue of Show Cause Notices in cases where the demand of duty was above Rs. 50 lakhs. In the present case, we find that even though the demand is clearly more than Rs.50 lakhs, no such pre-Show Cause Notice consultation was conducted by the Revenue. In fact, a letter was issued to the appellant on 21.04.2021 and the Show Cause Notice was issued on 28.04.2021 without even waiting for the reply from the appellant. Thus, we find that the authorities have not followed the mandatory instruction laid down in the Board’s Circular dated 21.12.2015 before issue of the instant Show Cause Notice. The Show Cause Notice issued without following the above said Circular is thus legally not sustainable.

10.1. In this context, we also observe that such Pre-Show Cause Notice consultation was made non-mandatory for suppression related cases vide Circular No.1079/03/2021-CX dated 11.11.2021. However, as pointed out by the appellant, the date of issuance of the said Circular was much after the date of issuance of the instant Show Cause Notice, which came to be issued on 28.04.2021. On this score, we also agree with the submission of the appellant that oppressive circulars would be applicable prospectively and thus the said Circular dated 11.11.2021, being oppressive in nature, would be applicable prospectively, i.e., from 11.11.2021, in terms of the ruling of the Hon’ble Apex Court in the case of Suchitra Components v Commissioner of C.Ex., Guntur [2007 (208) E.L.T. 321 (S.C.)].

10.2. We find that the above issue has been examined in detail by this Tribunal in the case of M/s. SIS Limited v Pr. Commissioner of C.G.S.T. and Central Excise [Final Order No. 77549 of 2025 dated 15.10.2025 in Service Tax Appeal No. 75555 of 2024 – CESTAT, Kolkata]. The relevant observations of the Bench in the said decision are reproduced below: –

“7. The relevant portions of the Circulars are extracted below:

Circular No. 1053/02/2017-CX dated 10th March 2017

5.0 Consultation with the noticee before issue of Show Cause Notice: Board has made pre show cause notice consultation by the Principal Commissioner/ Commissioner prior to issue of show cause notice in cases involving demands of duty above Rs. 50 lakhs (except for preventive/ offence related SCN’s) mandatory vide instruction issued from F No. 1080/09/DLA/MISC/15 dated 21st December 2015. Such consultation shall be done by the adjudicating authority with the assessee concerned. This is an important step towards trade facilitation and promoting voluntary compliance and to reduce the necessity of issuing show cause notice.

Circular No.1079/03/2021-CX Dated 11th November, 2021

5. It is, therefore, reiterated that pre-show cause notice consultation shall not be mandatory for those cases booked under the Central Excise Act, 1944 or Chapter V of the Finance Act, 1994 for recovery of duties or taxes not levied or paid or short levied or short paid or erroneously refunded by reason of:

a. fraud: or

b. collusion: or

c. wilful mis-statement: or

d. suppression of facts: or

e. contravention of any of the provision of the Central Excise Act, 1944 or Chapter V of the Finance Act, 1994 or the rules made there under with the intent to evade payment of duties or taxes

6. Trade, industry and field formations may be suitably informed.

7.1. A careful reading of the above Circulars would clarify that in the first Circular dated 10th March 2017, there is no whisper about suppression and non-suppression cases. A plain reading makes it clear that in both the cases, the pre-consultation procedure is mandated if the demanded amount is more than Rs.50 lakhs.

8. For the first time the Circular dated 11th November 2021, very specifically lists (a) to (e) cases, where such pre-consultation procedure need not be followed. The word ‘reiterated’ on its own cannot give any retrospective effect as has been canvassed by the Ld. Departmental Representative. Further, Paragraph 6 of the above Circular talks about the ‘Trade and Industry and field formations’ to be suitably informed. This itself clarifies that it is for future reference, since a specific change has been made as to how the pre-consultation procedure is to be followed.

9. Therefore, we are in agreement with the appellant that the required procedure of pre-consultation was not followed.

10. In the present case, it is also is seen that the Revenue has issued the Show Cause Notice demanding Rs.6.79 crores for the extended period. Out this demand, the Adjudicating authority has dropped the demand to the extent of Rs.6.45 crores [about 95% of the demand]. The Revenue is not aggrieved by the same and no appeal has been filed. Therefore, we take the view that no proper investigation was made while issuing the Show Cause Notice for the extended period. It is also on record that the data has been obtained from the ST 3 Returns and the Balance Sheets of the appellant. This also fortifies the view that there was no case of suppression has been made out against the appellant, in the first place. Viewing this from another angle, it is more in the nature of a demand for the normal period only, which in any case, required pre-consultancy procedure to be followed, which has not been done in this case.

11. Coming to the case law cited by the appellant, we find that the Hon’ble Gujrat High Court in the case of Jay Mahakali Industrial Service Versus Union of India [(2025) 29 Centax 353 (Guj.)], has considered the issue in a very detailed way and interpreted various decisions of the High Courts and held as under: –

“12.1 The aforesaid Circular came up for consideration before this Court in case of L AND T Hydrocarbon Engineering Ltd. v. Union of India reported in 2022 (4) TMI 70. This Court while considering the facts of the said case held as under:

ABSENCE OF MANDATORY PRE-SHOW CAUSE NOTICE CONSULTATION IS FATAL TO THE PRESENT SHOW CAUSE NOTICE.

83 In view of the Circular No. 1053/2/2017-CX., dated 10th March 2017, it is clear that the Board had made the pre show cause notice consultation mandatory for the Principal Commissioner/Commissioner prior to the issuance of show cause notice in cases involving the demands of duty above Rs.50 lakh. Such consultation is required to be done by the adjudicating authority with the assessee as an important step towards reducing the necessity of issuing show cause notice.

84 The contention of the learned A.S.G. that since the present case originated from the intelligence gathered from the DGGI such preconsulting is not required. The said contention runs contrary to the C/SCA/11308/2019 JUDGMENT DATED: 03/02/2022 recent clarification issued by the Board. For the very objection now being raised, a clarification was sought by the DGGI office from the Board as to whether the DGGI formations will fall under the exclusion category of the master circular dated 10th March 2017 read with the circular dated 19th November 2020. The Board vide the Circular No. F.No.116/13/2020-CX-3 Dated 11.11.2021 clarified that the exclusion from the pre-show cause notice consultation is case specific and not formation specific. Therefore, merely because in the present case, the case originated on account of investigation of the DGGI will not be a sufficient ground for not following the mandatory procedure prescribed by the Board which is binding on the department. Therefore, it was mandatory for the adjudicating authority in the present case to conduct the pre-show cause notice consultation and in absence of the same the present proceedings could be said to be bad in law and deserves to be quashed and set aside.

85 (i) Amadeus India Pvt Ltd v. Principal Commissioner – 2019-TIOL-1027-HC-DEL-ST

12. It will be immediately noticed that there are two exceptions carved out for the Respondent to engage in a pre SCN consultation. The first is that the SCN is preventive and the second is that it is related to an offence in terms of the Finance Act, 1994.

13. In the present case, as is evident from the impugned SCN, the alleged non-payment of service tax pertains to period between 2012­2013 to 2016-2017. Consequently, there is no ‘preventive’ aspect involved in the SCN and this is not even disputed by learned counsel for the Respondent. However, what is urged before the Court by the Respondent is that since the SCN was preceded by a search that was conducted in the business premises of the Petitioner, and the Petitioner also rendered itself liable for penal action ‘for suppression of facts and contravention of various statutory provisions with intent to evade payment of due service tax’ and other incidental levies, the SCN partakes of the character of an ‘offence related’ SCN and therefore falls within the exceptions carved out under para 5.0 of the Master Circular.

14. The above submission runs contrary to the very object of para 5.0 C/SCA/11308/2019 JUDGMENT DATED: 03/02/2022 which is to narrow down the scope of the dispute by engaging the Assessee on specific areas where the Respondent may require information/clarification from the Assessee regarding alleged evasion of service tax. In the context of the present case, in relation to documents recovered during the search and statements recorded of representatives to the Petitioner in that process, several questions may have arisen for consideration by the Respondent which may require a clarification from the Petitioner as to its conduct. It is to facilitate this very exercise that para 5.0 finds place in the Master Circular. The mere possibility that at the end of the adjudication process, the Petitioner may have to face consequences for having committed an ‘offence’ under Finance Act, 1994 need not per se render the SCN itself as an ‘offence related’ SCN. If that were to be the logic, then in every case para 5.0 can be dispensed with on the ground that the adjudication of the SCN is likely to be lead to the noticee facing proceedings for having committed an offence. The exception would then become the rule and not vice versa, and the need for any pre-notice consultation being rendered redundant. Further, without the conclusion of the adjudication on the SCN, the Respondent would not be in a position to decide whether an offence is made out.

13. In all the petitions, except Special Civil Application No.1770 of 2022, the show cause notice is issued based on the difference in value of income as per Form 26AS issued under the Income Tax Act, 1961 and Form ST3-return filed by the petitioners. In Special Civil Application No. 1770 of 2022, the show cause notice refers to the liability of service tax upon interpretation of the provisions of the Finance Act, 1994 read with various Notifications in relation to the issues as to whether the petitioner of the said petition constructed the roads for the general public or the private road and labour charges, TTA Charges, taxation which does not contain any of the ingredients of the fraud, wilful mis­statement for separation of facts for collusion which would categorize such show cause notice in the exception curved out in para 5 of the Circular No 1079 of 2021. 14.

14. Taking into consideration the above facts and in view of the decision of this Court in case of L AND T Hydrocarbon Engineering Ltd. (supra), we are of the opinion that none of the show cause notice except Special Civil Application No. 5685 of 2022 can be sustained in absence of pre-consultation notice.”

11.1. We find that even as per the Board Circulars, the Revenue was required to follow the pre-consultation procedure, which was not done in this case. The cited case law is squarely applicable to the facts of the present case.”

10.3. In view of the above discussion and by relying on the decision cited supra, we hold that the Show Cause Notice issued without following the requirement of pre-Show Cause Notice consultation as mandated in the above Circular, is legally not sustainable.

11. In view of the discussions in the preceding paragraphs, we hold that the demand of Service Tax, as confirmed vide the impugned order, is not sustainable and hence, the same is set aside.

11.1. As the demand of Service Tax itself does not survive, the question of demanding interest or imposing penalty under Section 78 of the Finance Act, 1994 does not arise.

11.2. Further, as there is no liability to Service Tax on the part of the appellant in this case, we agree with the submission made by the appellant that there was no need to take registration or file returns. Therefore, we do not find any justification in the imposition of penalty under Section 77(1)(c) of the Finance Act 1994 or the levy of late fee under Rule 7(C) of the Service Tax Rules, 1994 and accordingly, the said penalties are also set aside.

12. In the result, the impugned order is set aside and the appeal is allowed, with consequential relief, if any, as per law.

(Order pronounced in the open court on 20.01.2026)