Court Quashes Service Tax Demand Raised Solely on Income Tax Data Without Hearing the Assessee

Whether service tax can be demanded solely based on Form 26AS and income tax data without an independent inquiry and a fair hearing.

Facts of the Case
Somil Kumar Mittal took the Union of India and the Bengaluru Tax Office to court. The tax office had ordered him to pay service tax for 2015-16 based only on his old income tax records and Form 26AS.

Somil was upset because the decision was made without him being there to defend himself (ex parte). He believes that if he is given a fair chance to speak, he can prove he shouldn’t have to pay the tax at all because he is exempt.

Issue Involved In This Case
Whether the tax authorities legally demand service tax based solely on information from income tax returns and Form-26AS, without conducting an independent investigation or giving the taxpayer a fair chance to prove they were exempt from payment?

Decision Of The Court
The Court directed the tax authorities to re-examine the case with a focus on whether the petitioner’s activities legally qualify as a “service”, if they fall under the “negative list, or if they are covered by specific tax exemptions.

The authorities must also determine if the demand is barred by the statute of limitations. Following the quashing of the original order, the Court ordered that all previous instructions sent to the petitioner’s bank be rescinded immediately.

Finally, the petitioner was directed to appear before the Commissioner of Central Tax on May 18, 2026, to proceed with the matter.