The Gauhati High Court ruled that service tax cannot be imposed solely based on entries in Form 26AS when the underlying activity is exempt under the "negative list" category for transportation of goods by road. This decision came in the case of Sri Samujjal Phukan vs. Union of India & Others, where the petitioner, engaged in transporting goods by road using his own vehicles, was accused by GST authorities of suppressing taxable income from 2014-15 to 2017-18. The authorities claimed an unpaid service tax liability based on Form 26AS data, asserting that Phukan received taxable consideration amounting to nearly ₹3.93 crore.
Phukan argued that he was not a Goods Transport Agency or courier agency and that his services were exempt from service tax under Section 66D of the Finance Act, 1994. Despite this, the department confirmed a tax liability of over ₹58 lakh by invoking the extended limitation period under Section 73(1).
The Court emphasized that taxation requires a valid statutory liability, and mere income appearance in Form 26AS does not automatically make receipts taxable under the Finance Act, 1994. It highlighted that transportation by road is covered under the “negative list” unless involving Goods Transport Agencies or courier agencies. The Court found that the authorities failed to determine the actual nature of services before raising the demand.
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Regarding limitation, the Court stated that extended limitation under Section 73(1) can only be invoked with clear evidence of fraud or intent to evade tax. The High Court exercised writ jurisdiction, finding the proceedings arbitrary and unsustainable due to improper determination of liability and wrongful invocation of extended limitation.
Order Date - 21 April 2026
Parties: Sri Samujjal Phukan Vs Union of India & Others
Facts -
- Sri Samujjal Phukan was engaged in transporting goods by road using his own vehicles in and around Dibrugarh, Assam. The GST authorities alleged that he suppressed taxable income between 2014-15 and 2017-18 and failed to obtain service tax registration or file ST-3 returns.
- The department relied mainly on Form 26AS data received from the Income Tax Department and claimed that the petitioner had received taxable consideration amounting to nearly ₹3.93 crore, leading to an alleged unpaid service tax liability of ₹58.72 lakh.
- The petitioner argued that he was not a Goods Transport Agency or courier agency but merely transported goods through his own vehicles. Since transportation of goods by road falls under the negative list under Section 66D of the Finance Act, 1994, his services were exempt from service tax.
- Despite seeking additional time to respond and claiming lack of proper hearing by the Aizawl authority, the department passed an Order-in-Original confirming tax, interest, and equal penalty totaling over ₹58 lakh by invoking the extended limitation period under Section 73(1).
Issue -
- Whether the department could levy service tax and invoke the extended limitation period solely on the basis of Form 26AS?
Order -
- The Court observed that taxation must first be supported by a valid statutory liability. Merely because income appeared in Form 26AS or tax was deducted at source under the Income Tax Act did not automatically mean that the receipts were taxable under the Finance Act, 1994. The authorities failed to examine the actual nature of services rendered by the petitioner before raising the demand.
- The Court noted that transportation of goods by road is specifically covered under the “negative list” under Section 66D of the Finance Act, except in cases involving Goods Transport Agencies or courier agencies. Since the petitioner claimed to be operating independently with his own vehicles, the authorities were required to conclusively determine taxability instead of mechanically treating all receipts as taxable turnover.
- On limitation, the Court held that extended limitation under Section 73(1) can be invoked only when there is clear evidence of fraud, wilful suppression, collusion, or intent to evade tax. Mere non-filing of returns or failure to furnish documents cannot automatically establish suppression. The adjudicating authority failed to record any proper finding proving deliberate intent to evade tax.
- The High Court further held that despite the existence of an appellate remedy, writ jurisdiction could still be exercised where the authority acted without jurisdiction or violated principles of natural justice. Since the demand was raised without proper determination of liability and by wrongly invoking extended limitation, the Court found the proceedings arbitrary and unsustainable in law.
