Service tax demand based solely on unverified third-party data is unsustainable.

The appellant, a service-tax-registered proprietary concern, provided manpower and security services and supplied diesel for generators to government departments.

The department issued two show-cause notices for FY 2015–16 and FY 2016–17, based on third-party data received from the Income Tax Department.

The appellant maintained that diesel was reimbursed at actual cost against petrol-pump bills and that the demand was raised without verifying the data or the services provided.

For FY 2015–16, the appellant claimed diesel reimbursements of ₹37,75,462; for FY 2016–17, it claimed ₹34,99,489.

The Commissioner (Appeals), by a common order dated 30 April 2025, upheld the demands, leading to these appeals.

1. Whether service tax was payable on the diesel amounts reimbursed to the appellant at actual cost for operating generators.

2. Whether demands based on third-party Income Tax Department data, without further departmental verification of the data or the services allegedly provided, were sustainable.

The Tribunal treated amounts reimbursed for diesel supplied at actual cost, supported by petrol-pump bills and the relevant arrangement, as amounts incurred by the appellant as a “pure agent,” and held that service tax was not payable on those amounts.

It also applied the principle that a demand cannot be sustained on unverified third-party data and assumptions about the value, category, or recipient of services; the department must verify the information and investigate the alleged taxable activity.

The Tribunal relied on *Sharma Fabricators Pvt. Ltd. v. CCE, Allahabad*, 2017 (5) G.S.T.L. (Tri.-All.), and *Lord Krishna Real Infra Pvt. Ltd. v. Commissioner of CGST, Noida*, Final Order No. 70126/2019-CU(DB), dated 7 January 2019; it also referred to the Allahabad High Court’s judgment in the *Sharma Fabricators* matter, without supplying its citation.

Notification No. 30/2012-ST, as amended by Notification No. 7/2015-ST, was mentioned in the appellant’s submission concerning reverse charge.

The Tribunal found that the 7 September 2015 letter from the Additional Director General of Foreign Trade required diesel to be supplied at market price and provided for monthly payment against petrol-pump bills.

It treated this arrangement as evidence that the appellant acted as a pure agent and that the amount was reimbursed at actual cost; accordingly, the ₹37,75,462 diesel amount was not subject to service tax.

Separately, the department had issued the notices using third-party data without investigating whether the data was accurate or determining which services had been provided, to whom, and for what value.

The Tribunal considered the resulting demand—based on an assumed value of ₹1,42,58,452—to rest on presumption rather than verification, and found the cited precedents and the Allahabad High Court judgment applicable.

It allowed both appeals and granted consequential relief, if any, in accordance with law.