Sigma Trade Wings vs Lucknow
- Court
- Customs, Excise and Service Tax Appellate Tribunal
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT No.II
(E-Hearing)
Service Tax Appeal No.70006 of 2015
(Arising out of Order-in- O riginal No.46/Commr/Lko/ST/2014-15 dated
25.03.2015 of the Commissioner Central Excise and Service Tax Lucknow)
M/s Sigma Trade Wings, …..Appellant
(D-165, Faizabad Road, Indira Nagar, Lucknow)
VERSUS
Commissioner of Central Excise &
Service Tax, Lucknow ….Respondent
(7-A, Ashok Marg, Lucknow)
PPEARANCE
A :
Shri Dharmendra Kumar, Chartered Accountant for the Appellant
Shri Santosh Kumar, Authorised Representative for the Respondent
CORAM:
HON’BLE MR. P.A. AUGUSTIAN, MEMBER (JUDICIAL)
HON’BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70318/2026
DATE OF HEARING : 30 July, 2026
DATE OF PRONOUNCEMENT : 01 September, 2026
SANJIV SRIVASTAVA:
This appeal is directed against order-in-original No.
46/Commr/Lko/ST/ 2014-15 dated 25.03.2015 of the
Commissioner Central Excise and Service Tax Lucknow. By the
impugned order following has been held:
ORDER
1. I confirm the demand of service tax amounting to Rs.
1,78,36,694/-(Rupees One Crore, Seventy Eight Lacs, Thirty
Six Thousand, Six Hundred Ninety Four only) against M/s
Sigma Trade Wings, D-165, Faizabad Road, Indira Nagar,
Lucknow under Section 73 of the Finance Act, 1994 was
confirmed.
Service Tax Appeal No.70006 of 2015
2
2. I also order the recovery of interest at appropriate rate on
the amount of service tax confirmed at SI.No. 1 above, from
M/s Sigma Trade Wings, D- 165, Faizabad Road, Indira
Nagar, Lucknow under Section 75 of the Finance Act, 1994
was orderd.
3. I also impose a penalty of Rs. 1,78,36,694/- (Rupees One
Crore, Seventy Eight Lacs, Thirty Six Thousand, Six Hundred
Ninety Four only) upon M/s Sigma Trade Wings, D-165,
Faizabad Road, Indira Nagar, Lucknow under Section 78 of
the Finance Act, 1994.
4. I also imposed a penalty of Rs. 200/- for every day w.e.f.
01.04.2004 till the actual date of taking of registration for
"Business Auxiliary Service upon M/s Sigma Trade Wings, D-
165, Faizabad Road, Indira Nagar, Lucknow under Section
77(1) of the Finance Act, 1994.
2.1 Appellant is a partnership firm and Shri Mahendra Dev
Dixit, Shri Narendra Dev Dixit & Shri Kamla Prasad Dixit are the
partners of the firm. They are engaged in providing services
covered under category Advertising Agency Services' which is a
taxable service in terms of Section 65 (105)(e) of the Finance
Act, 1994. They were registered with the department and have
Service Tax Registration No AAOFS9857RST001.
2.2 Acting upon intelligence that the party was not discharging
its service tax liability fully, the premises of appellant was
searched on 12.02.2010 in presence of Ms. Pronita Sharma,
Authorized Signatory of the appellant, who in her statement
recorded on spot stated that
the firm M/s Sigma Trade Wings, D-165, Faizabad Road,
Indira Nagar, Lucknow is registered with the service tax
department.
It is a partnership firm and Shri Mahendra Dev Dixit, Shri
Narendra Dev Dixit & Shri Kamla Prasad Dixit are the
partners of the firm.
Shri Mahendra Deo Dixit monitors & supervises all the
works of the firm.
Service Tax Appeal No.70006 of 2015
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Cenvat credit is taken on the input services and it is
utilized in the payment of service tax of M/s Sigma Trade
Wings.
2.3 Shri Mahendra Dev Dixit, partner, in his statement dated
12.02.2010 stated that:-
He is looking after works of marketing, operation,
execution of advertising material, follow up for the
realization of out standings as well as looking after all the
staff.
They do not deposit Service Tax unless their bill is finally
realized or settled. In case of partial realization against a
particular bill they do not make service tax payment
against this partial realization. The realized amount is
shown in receiving but as on this amount service tax is to
be deposited later on, when the bill is finally paid/settled.
Because of this reason there is difference between realized
amount and service tax deposited.
They make full payment of service tax immediately after
realization of full amount of a particular bill. In case where
realization of remaining amount of a particular bill is not
feasible, they settle the same on partially realized amount
and then make payment on this realized amount.
2.4 Shri Rajeev Bansal, C.A. of appellant in his statement
dated 25.08.2010 stated that,-
He has conducted tax audit of M/s Sigma Trade wings and
M/s Kadam Advertising & Mkt. Pvt. Ltd. for financial year
2007-08 & 2008-09.
Balance sheet and accounts are audited on the basis of
Computer generated records such as cash book, ledger &
Journal book.
There are transaction of loans & advances which both the
firms do in case of need. The transactions can be seen
from the ledger accounts of both the firm and no tax
liability accrues from these transactions.
Service Tax Appeal No.70006 of 2015
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2.5 During the course of investigations, it was found that the
party had made an agreement with the Nagar Palika Parishad,
Raebareli to collect the advertisement tax on advertisements
displayed in the municipal limits on pre-decided rates as per
agreement.
2.6 Appellant provided the balance sheets of their firm for the
periods 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 and
2009-10. In the profit & loss account of the balance sheets of
the party, income is shown under the headings paper ad, service
charges, misc. income, municipal tax, display charges & other
receipts. The income shown under various heads in the Balance
Sheet of the party is shown below in tabular form:-
Receipt
as per
Balance
Sheet
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Paper
Ad
783647 542295 131141 0 0
Service
Charges
1823728
3470604
4170691
0 0
2
0
3
Misc.
Income
32541 6124 21407 0 0
Municipa
l Tax
0 1234245 166650 240900
Display
Charges
0 0 0 7265128
6311447
0
7
Other
Receipts
0 0 0 79569 14462
Gross
receipts
from
Business
0 0 0 0 0 8399226
8
Total 1905347
3648870
4202611
7297174
6312893
8399226
0
4
1
9
9
8
2.7 On scrutiny of balance sheets, tally account and ST-3
returns filed by the party, it was found that the year wise
payments received by the party from their clients as per the
balance sheets/tally account and the taxable amount shown by
them in their ST-3 returns submitted to the department show
difference. The year wise payments received by the party from
their clients as per balance sheet/Tally account, the service tax
chargeable thereon and the difference of Service Tax payable by
the party are depicted below in the tabular form:-
Service Tax Appeal No.70006 of 2015
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Period Receipts as per Service tax (including Edu. Cess)
Tally A/c Balance
sheet
@ % Payable on
higher of 2 &3
Paid Difference
1 2 3 4 5 6 7
2004-
05
0 19053470 10.2 1943454 699569 1243885
2005-
06
0 36488704 10.2 3721848 1622688 2099160
2006-
07
0 42026111 12.24 5143996 3466671 1677325
2007-
08
59388060 72971749 12.36 9019308 4560990 4458318
2008-
09
68118168 63128939 12.36 8419406 4600493 3818913
2009-
10
0 83992268 10.3 8651204 4112111 4539093
TOTAL 36899216 19062522 17836694
2.8 Shri Mahendra Dev Dixit, Partner in his statement recorded
on 10.12.2010 stated that,-
regarding the difference in the received amount shown in
the tally account for the financial year 2008-09 and the
figures shown in the balance sheet for this year, he replied
that due to lack of knowledge of accounts, he will inform
by 15th December, 2010 after consulting his accountant.
value of taxable services provided as mentioned in ST-3
returns is reflected in profit & loss account of the balance
sheet on its annexures side under the head income.
the difference between the value of taxable service shown
in the ST-3 returns and income shown in the profit & loss
account of the balance sheets/tally account, is for lot of
reasons for such differences such as non taxable services,
realization, material supplied etc., provided by them. He
stated that he will submit reconciled figures in this regard
by 15th December, 2010.
Municipal Tax shown as income in their balance sheet is
the advertisement tax for the display on boards within the
Municipal Limits, on the basis of contracts entered between
them and the Municipalities. They collect this tax on the
basis of pre decided rate as per the agreement. They
collect this tax on behalf of Nagar Palika Parishad,
Raebareli as per agreement dated 31.03.2008.
Service Tax Appeal No.70006 of 2015
6
M/s Sigma Trade Wings, Lucknow vide their statement
dated 10.12.10 admitted that the value of taxable services
shown in the ST-3 returns is reflected under the head
income shown in the profit & loss account of the balance
sheet.
2.9 A Show Cause Notice dated 12.01.11 was issued to the
appellant asking them to show cause as to why:
(i) Service Tax amounting to Rs 1,78,36,694.00 (Rupees
One crore seventy eight lacs thirty six thousand six
hundred ninety four only) should not be demanded and
recovered from them in terms of proviso to Section
73(1) of the Act for violation of Section 68 read with
Rule 6 of the Service Tax Rules, 1994.
(ii) The interest amount should not be levied and recovered
at applicable rate on the above amount of Service Tax &
Education Cess under Section 75 of the Act for late
depositing of Service Tax.
(iii) Penalty should not be imposed upon them under the
provisions of Section 76 and 78 of Act upto 09.05.08
and w.e.f. 10.05.08 under section 78 of the Finance Act
1994 for failure to pay Service Tax & suppressing the
facts and value of taxable service and for contravention
of Section 68 of the Act read with Rule 6 of the Rules.
(iv) Penalty should not be imposed upon them under the
provision of Section 77of the Finance Act, 1994 for
contravention of Rule 4 & 7 of Service Tax Rules, 1994
read with Section 69 & 70 of Finance Act, 1994 by not
applying for registration under 'Business Auxiliary
Service" despite being indulged in receiving/providing
taxable service; by not filing the required statutory
returns.
2.10 The show cause notice was adjudicated vide Order-in-
Original No. 33/Commr/LKO/ST/2011-12 dated 29.02.2012
holding as follows:
A demand of service tax amounting to Rs. 1,78,36,694/-
(Rupees One Crore, Seventy Eight Lacs, Thirty Six
Service Tax Appeal No.70006 of 2015
7
Thousand, Six Hundred Nine Four only) against M/s Sigma
Trade Wings, D-165, Faizabad Road, Indira Nagar, Lucknow
under Section 73 of the Finance Act, 1994 was confirmed.
Recovery of interest at appropriate rate on the amount of
service tax confirmed at SI.No. 1 above, from M/s Sigma
Trade Wings, D- 165, Faizabad Road, Indira Nagar, Lucknow
under Section 75 of the Finance Act, 1994 was orderd.
Imposed a penalty of Rs. 1,78,36,694/- (Rupees One Crore,
Seventy Eight Lacs, Thirty Six Thousand, Six Hundred Nine
Four only) upon M/s Sigma Trade Wings, D-165, Faizabad
Road, Indira Nagar, Lucknow under Section 78 of the
Finance Act, 1994.
Imposed a penalty of Rs. 200/- for every day w.e.f.
01.04.2004 till the actual date of taking of registration for
"Business Auxiliary Service upon M/s Sigma Trade Wings,
D-165, Faizabad Road, Indira Nagar, Lucknow under Section
77(1) of the Finance Act, 1994.
2.11 Aggrieved with the order in original, party preferred an
appeal in Cestat & Hon'ble Cestat vide Final order no
ST/A/55630/2013 dated 19.02.2013, remanded the case for
fresh adjudication with the observation as under
2. Ld. Counsel appearing for the appellant submitted that
page 29 which has recorded defence plea also supports the
case of the appellant. But Revenue brings out that the
documents were not given to the authorities as is revealed
by page 44. We are unable to understand why the
adjudicating authority failed to reconcile the figures
between ST-3 Return and Sales Tax Return. But it was
submitted by ld. Counsel that what they conceived to be
taxable service, the charges thereon exhibited at pate 52
of appeal folder has suffered tax.
3. We notice that had there been a thread bare analysis of
the facts, figures and evidence, such a huge demand
would not have arisen. Therefore, without keeping the
matter pending in the Tribunal, we remand the matter to
the Id. Adjudicating Authority to consider grievance of
Service Tax Appeal No.70006 of 2015
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Revenue properly and also the pleadings of the appellant
testing the same with evidence. That authority should not
hesitate to even call for the figures from the sales tax
authority to find out the figures disclosed in ST-3 return
whether agreed with the figures in the Sales Tax Return
filed for the relevant period. If there is any discrepancy,
the appellant should be given an opportunity to explain.
4. While remanding the matter, it is anxiety of the Id. DR
that the matter should receive appropriate consideration
by the Id. Adjudicating Authority following the ratio laid
down by the Tribunal in the case of Agarwal Colour Lab.
We have no hesitation to agree with him. We are also
impressed to guide the Id. Adjudicating Authority to take
advantage of the judgement of the apex Court in the case
of Imagic Creative Pvt. Ltd. Reported in 2008(9) STR 337
(SC) while passing re-adjudicating order.
2.12 In terms of the above order of the CESTAT matter has
been taken up for de novo consideration and has been
adjudicated as per the impugned order referred in para 1 above.
2.13 Aggrieved appellant has filed this appeal.
3.1 The matter was heard electronically. We heard Shri
Dharmendra Kumar, Chartered Accountant for the appellant and
Shri Santosh Kumar Authorzed Representative for the revenue.
3.2 Arguing for the appellant learned counsel submits that:
During the disputed period appellant was engaged in
following business activities:
o Selling of space for advertisement and other ancillary
advertisement services.
o
Income from writing advertisements on walls;
o
Income from selling of space for advertisements in
print media.
o Sale of printed flex
o Income from collection of advertisement tax.
In respect of Income from selling of space fro
advertisement and other ancillary advertisement services,
Service Tax Appeal No.70006 of 2015
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appellant has discharged the service tax due and there is
no dispute.
In respect of income from writing advertisements on walls,
it is evident that activities undertaking by the appellant
were of merely writing the advertisement on walls. They
were not doing any other activity as specified by Section
65 (105) of Finance Act, 1994 to hold that this activity was
taxable as defined by the said section.
In respect of income from selling of space in print media, it
is evident that appellant was engaged only in trading the
space made available by the specified newspapers to the
advertisers and charging commission, from the print
media. Service of selling space in newspaper for
advertisement has been kept out of the definition sale of
space in print media as per explanation 2 to Section 65
(105) (zzzm) of Finance Act, 1994. Thus no service tax
was payable on these charges.
In respect of sale of printed flex, it is evident that
appellant was selling these and paying the vat in respect of
the goods sold. As these activites were in relation to sale
of goods on which VAT has been paid these activities
cannot be subjected to service tax.
In respect of income from collection of advertisement tax.
Undisputedly these taxes were levied as Uttar Pradesh
Municipal Corporation Act, 1959. Appellant got the right to
collect these tax as per agreement entered by them with
Nagar Palika Parishad Raibareli as per the pre-approved
rates. These ncome could not have been subjected to
service tax, Reference is made to decision of Mumbai
Bench in case of Ideal Road Builders (P) Ltd. [2015 (40)
S.T.R. 480 (Tri. - Mumbai)]
In respect of demand of service tax on the basis of income
reported in Profit and Loss Account, reliance is placed on
the decisions in case of:
o Firm Foundation & Housing (P) Ltd. [2018 (16)
G.S.T.L. 209 (Mad.)]
Service Tax Appeal No.70006 of 2015
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o Sigma Trade Wings [Final Order No 71658/2018
dated 17.07.2018 in ST/51726/2015]
o Pappu Crane Services [Final Order No 72690/2018
dated 26.11.2018 in ST/70031/2016]
Demand is also barred by limitation as appellant had
bonafide belief that these incomes are not subject to levy
of service tax. Reliance placed on the decisions:
o Uniworth Textiles Ltd. [2013 (288) E.L.T. 161 (S.C.)]
o Tarun Gupta [[Final Order No 59773-59774/2024
dated 04.12.2024 in ST/50544,51815/2017]
3.3 Authorized representative re-iterated the findings recorded
in the impugned order.
4.1 We have considered the impugned order along with the
submissions made in appeal and during the course of arguments.
4.2 Impugned order records the findings as follows:
“The fact of case in brief is that the party is registered
under service tax for providing of advertisement agency
services. On the basis of intelligence that the party is not
discharging its Service Tax liability properly, a search was
conducted against party, after detailed investigation, Show
Cause Notice was issued and subsequently vide O-I-0
33/11-12 dated 29.02.2012 demand of Rs 1,78,36,694/-
was confirmed against the party. Feeling aggrieved with
the said order the party preferred an appeal before Hon'ble
CESTAT, only on the plea that party has suffered entire
sales tax on sale of Hoardings banners & it is settled law
that once the sales tax discharged by them, they cannot
be asked to pay Service Tax on the same value.
Hon'ble CESTAT have examined the defence taken by the
party & observed that Adjudicating Authority has failed to
reconcile the figures between ST-3 Return & Sales Tax
Return & if there had been a thread bare analysis of this
fact such a huge demand would not have arisen.
At the same time Hon'ble CESTAT has also directed that
while Adjudicating the case Deptt., should not hesitate to
Service Tax Appeal No.70006 of 2015
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call the figures from sales tax authorities to ascertain the
actual figure related to sale of goods.
20. Thus I have come to conclusion that the limited issue
in this remand case has to be decided that whether party
has sold their goods to their client and discharge their
vat/sales tax liability against such sale of goods.
Party in their defence reply submitted that they have sold
the goods amounting to Rs. 102607560/- during the
disputed period i.e. 2004-05 to 2009-10.
Party vide their letter dated 08.02.2014 has intimated
their date of registration, TIN No. and ward no. where they
are registered for the purpose of trade tax.
To verify the contention of the party a correspondence
dated 10.12.2014 was made with The Assistant
Commissioner of Sales Tax/Commercial Tax, Lucknow,
wherein it has been intimated to them that a case in
respect of M/s. Sigma Trade Wings, D-165, Faizabad Road,
Indira Nagar, Lucknow, is under process of adjudication,
and Trade Tax returns pertaining to the period of financial
years 2004-05 to 2009-10, are required for verification of
facts and figures regarding sale made by them.
Accordingly, he was requested to furnish copies of Trade
Tax returns/ annual financial details filed by M/s. Sigma
Trade Wings, D-165, Faizabad Road, Indira Nagar,
Lucknow/ accessed by his goodself, for the period of
financial years 2004-05, 2005-06, 2006-07, 2007-08,
2008-09 & 2009-10.
21. The Deputy Commissioner, Commercial Tax/ Trade Tax
vide his letter dated 07.02.2015 has enclosed the
acknowledgement and self assessment of annual tax
return filed by the party for the Financial year 2007-08 to
2009-10 and also intimated that desired documents for the
period 2004-05 to 2006-07 are not available with them
and they would provide the same as soon as they locate
the said documents.
Service Tax Appeal No.70006 of 2015
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On the perusal of the documents submitted by the
Commercial Tax department it is quite evident that they
have not discharged any Sales Tax liability during the
Financial Year 2007-08 to 2009-10.
22. In light of above letter, a letter dated 25.02.2015 was
sent to the party to explain that in your defence reply
dated 11.11.2014, you have filed Sales Tax Assessment
Order for the period of 2004-05 to 2009-10 as well as the
certificate of Shri Kamod & Associates, C.A. wherein he has
certified that your firm has sold the goods for Rs.
10,26,07,560/- and Sales Tax amounting to Rs.
1,25,59,167/- has also been deposited for the period of
2004-05 to 2009-10, out of which Sales Tax of Rs.
99,09,591/- pertains to the period of 2007-08 to 2009-10.
On being inquired of, the Deputy Commissioner (Sale Tax),
Khand-21, Lucknow vide his letter dated 07.02.2015 has
categorically informed that no trade tax has been
deposited by your firm for the period of 2007-08 to 2009-
10.
Therefore, it appears that you have misstated the fact at
the time of adjudication.
As per directions of the Hon'ble CESTAT, you are requested
to explain the discrepancies between your claim and the
information recorded in the Trade Tax Department by
04.03.2015 and if you fail to explain the anomaly noticed
by documentary evidences, in that situation it would be
safely assumed that you have nothing to say on this issue.
Accordingly, the figures provided by the Sales Tax
Department would be considered as final while
adjudicating the case.
Party vide letter dated 04.03.2015 has sought 15 days
time to submit their clarification on this issue. Party even
did not file their defense on this account even after lapse
of 15 days.
Service Tax Appeal No.70006 of 2015
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Therefore, I am of the opinion that the main plea taken by
the party before Hon'ble CESTAT that they have sold the
goods and discharge the vat on that amount is not
supported by the documentary proof. On the contrary, the
letter of Deputy Commissioner, Commercial tax specifically
narrate that the party has not paid any VAT amount during
the period 2007-08 to 2009-10.
Accordingly, I am of the view that party has misstated the
fact before CESTAT and therefore it cannot be accepted
that party has sold any goods during providing of
advertisement agency services and thus the benefit of
reduction of amount related to sale of the goods cannot be
extended in lieu of their claim i.e. they have sold the goods
amounting to Rs. 10,26,07,560/-. 23. In their defense
reply party has also contended that the demand on
miscellaneous income, amount shown as sundry debtors
has been confirmed against them. I have examined the
issue and observed that my predecessor has discussed all
these issues in detail while passing the order in original
and I am convinced that the O-I-O has been passed as per
established rule on these issues.
It is worth mentioning here that party has not brought any
fresh documents/evidence on this account before me to
reconsider this issue.
In short, I have found no infirmity in the order in original
to intervene and therefore I pass the following order.”
4.3 We find that matter has been decided in the de novo
proceedings after being remanded back by the tribunal vide Final
Order No ST/A55630/2013 dated 19.02.2013. We have
reproduced the observations made by the CESTAT while
remanding the matter back to adjudicating authority in para
2.10. From the perusal of the observations made by the CESTAT
while remanding the matter back to adjudicating authority for
reconsideration tribunal had set aside the earlier order in original
dated 29.02.2012. The observations made in para 3 of the
tribunal order are reproduced below:
Service Tax Appeal No.70006 of 2015
14
“We notice that had there been a thread bare analysis
of the facts, figures and evidence, such a huge demand
would not have arisen. Therefore, without keeping the
matter pending in the Tribunal, we remand the matter
to the Ld. Adjudicating Authority to consider grievance
of Revenue properly and also the pleadings of the
appellant testing the same with evidence. That
authority should not hesitate to even call for the figures
from the sales tax authority to find out the figures
disclosed in ST-3 return whether agreed with the
figures in the Sales Tax Return filed for the relevant
period. If there is any discrepancy, the appellant should
be given an opportunity to explain.”
4.4 From the observations made it is evident that tribunal had
found the order dated 29.02.2012 not sufficient in analyzing the
evidences and record and have remanded the matter back. By
remanding the matter tribunal has set aside the order dated
29.02.2012, and in the impugned order, the adjudicating
authority without going into the analysis of facts, figures and
evidences has pre-functorily agreed with the finding recorded in
the earlier order which has been set aside. Such an approach
show total non application of mind by the adjudicating authority
while passing the impugned order. The impugned order not only
being contrary to the principles of judicial hierarchy is totally a
non speaking order.
4.5 We also observe that the impugned order fails to record
any findings on the submissions made by the appellant in the
remand proceedings and have not even recorded any findings on
the decisions which tribunal has directed the adjudicating
authority to take into consideration. Such an order which do not
considers the submissions made is in violation of principle of
natural justice and needs to be set aside for this reason itself.
4.6 In case of Kranti Associates Pvt Ltd. vs Masood Ahmed
Khan [2011 (273) E.L.T. 345 (S.C.)] Hon’ble Supreme Court has
observed as follows:
“15. The necessity of giving reason by a body or authority
in support of its decision came up for consideration before
Service Tax Appeal No.70006 of 2015
15
this Court in several cases. Initially this Court recognized a
sort of demarcation between administrative orders and
quasi-judicial orders but with the passage of time the
distinction between the two got blurred and thinned out
and virtually reached a vanishing point in the judgment of
this Court in A.K. Kraipak and Others v. Union of India and
Others reported in AIR 1970 SC 150.
16. In Kesava Mills Co. Ltd. and Another v. Union of India
and Others reported in AIR 1973 SC 389, this Court
approvingly referred to the opinion of Lord Denning in
Rigina v. Gaming Board Exparte Benaim [(1970) 2 WLR
1009] and quoted him as saying “that heresy was scotched
in Ridge and Boldwin, 1964 AC 40”.
17. The expression „speaking order‟ was first coined by
Lord Chancellor Earl Cairns in a rather strange context.
The Lord Chancellor, while explaining the ambit of Writ of
Certiorari, referred to orders with errors on the face of the
record and pointed out that an order with errors on its
face, is a speaking order. (See 1878-97 Vol. 4 Appeal
Cases 30 at 40 of the report)
18. This Court always opined that the face of an order
passed by a quasi-judicial authority or even an
administrative authority affecting the rights of parties,
must speak. It must not be like the „inscrutable face of a
Sphinx‟.
19. In the case of Harinagar Sugar Mills Ltd. v. Shyam
Sunder Jhunjhunwala and Others, AIR 1961 SC 1669, the
question of recording reasons came up for consideration in
the context of a refusal by Harinaqar to transfer, without
giving reasons, shares hold by Shyam Sunder. Challenging
such refusal, the transferee moved the High Court
contending, inter alia, that the refusal is mala fide,
arbitrary and capricious. The High Court rejected such
pleas and the transferee was asked to file a suit. The
transferee filed an appeal to the Central Government
under Section 111 Clause (3) of Indian Companies Act,
1956 which was dismissed. Thereafter, the son of the
Service Tax Appeal No.70006 of 2015
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original transferee filed another application for transfer of
his shares which was similarly refused by the Company.
On appeal, the Central Government quashed the resolution
passed by the Company and directed the Company to
register the transfer. However, in passing the said order.
Government did not give any reason. The company
challenged the said decision before this Court.
20. The other question which arose in Harinagar (supra)
was whether the Central Government, in passing the
appellate order acted as a tribunal and is amenable to
Article 136 jurisdiction of this Court.
21. Even though in Harinagar (supra) the decision was
administrative, this Court insisted on the requirement of
recording reason and further held that in exercising
appellate powers, the Central Government acted as a
tribunal in exercising judicial powers of the State and such
exercise is subject to Article 136 jurisdiction of this Court.
Such powers, this Court held, cannot be effectively
exercised if reasons are not given by the Central
Government in support of the order (Para 23, page 1678-
79).
22. Again in the case of Bhagat Raja v. Union of India
and Others, AIR 1967 SC 1606, the Constitution Bench of
this Court examined the question whether the Central
Government was bound to pass a speaking order while
dismissing a revision and confirming the order of the State
Government in the context of Mines and Minerals
(Regulation and Development) Act, 1957, and having
regard to the provision of Rule 55 of Mineral and
Concessions Rules. The Constitution Bench held that in
exercising its power of revision under the aforesaid Rule
the Central Government acts in a quasi-judicial capacity
(See para 8 page 1610). Where the State Government
gives a number of reasons some of which are good and
some are not, and the Central Government merely
endorses the order of the State Government without
specifying any reason, this Court, exercising its jurisdiction
Service Tax Appeal No.70006 of 2015
17
under Article 136, may find it difficult to ascertain which
are the „grounds on which Central Government upheld the
order of the State Government (See para 9 page 1610).
Therefore, this Court insisted on reasons being given for
the order.
23. In M/s. Mahabir Prasad Santosh Kumar v. State of
U.P and Others, AIR 1970 SC 1302, while dealing with U.P.
Sugar Dealers License Order under which the license was
cancelled, this Court held that such an order of
cancellation is quasi-judicial and must be a speaking one.
This Court further held that merely giving an opportunity
of hearing is not enough and further pointed out where the
order is subject to appeal, the necessity to record reason is
even greater. The learned Judges held that the recording
of reasons in support of a decision on a disputed claim
ensures that the decision is not a result of caprice, whim or
fancy but was arrived at after considering the relevant law
and that the decision was just. (See para 7 page 1304).
24. In the case of M/s. Travancore Rayons Ltd. v. The
Union of India and Others. AIR 1971 SC 862 = 1978 (2)
E.L.T. (J378) (S.C.), the Court, dealing with the revisional
jurisdiction of the Central Government under the then
Section 36 of the Central Excise and Salt Act, 1944, held
that the Central Government was actually exercising
judicial power of the State and in exercising judicial power
reasons in support of the order must be disclosed on two
grounds. The first is that the person aggrieved gets an
opportunity to demonstrate that the reasons are erroneous
and secondly, the obligation. to record reasons operates as
a deterrent against possible arbitrary action by the
executive authority invested with the judicial power (See
para 11 page 865-866).
25. In M/s. Woolcombers of India Ltd. v. Woolcombers
Workers Union and Another, AIR 1973 SC 2758, this Court
while considering an award under Section 11 of Industrial
Disputes Act insisted on the need of giving reasons in
support of conclusions in the Award. The Court held that
Service Tax Appeal No.70006 of 2015
18
the very requirement of giving reason is to prevent
unfairness or arbitrariness in reaching conclusions. The
second principle is based on the jurisprudential doctrine
that justice should not only be done, it should also appear
to be done as well. The learned Judges said that a just but
unreasoned conclusion does not appear to be just to those
who read the same. Reasoned and just conclusion on the
other hand will also have the appearance of justice. The
third ground is that such awards are subject to Article 136
jurisdiction of this Court and in the absence of reasons, it
is difficult for this Court to ascertain whether the decision
is right or wrong (See para 5 page 2761).
26. In Union of India v. Mohan Lal Capoor and Others,
AIR 1974 SC 87, this Court while dealing with the question
of selection under Indian Administrative Service/Indian
Police Service (Appointment by Promotion Regulation) held
that the expression “reasons for the proposed
supersession” should not be mere rubber stamp reasons.
Such reasons must disclose how mind was applied to the
subject matter for a decision regardless of the fact whether
such a decision is purely administrative or quasi-judicial.
This Court held that the reasons in such context would
mean the link between materials which are considered and
the conclusions which are reached. Reasons must reveal a
rational nexus between the two (See para 28 page 98).
27. In Siemens Engineering and Manufacturing Co. of
India Ltd. v. The Union of India and Another, AIR 1976 SC
1785, this Court held that it is far too well settled that an
authority in making an order in exercise of its quasi-
judicial function, must record reasons in support of the
order it makes. The learned Judges emphatically said that
every quasi-judicial order must be supported by reasons.
The rule requiring reasons in support of a quasi-judicial
order is, this Court held, as basic as following the
principles of natural justice. And the rule must be observed
in its proper spirit. A more pretence of compliance would
not satisfy the requirement of law (See para 6 page 1789).
Service Tax Appeal No.70006 of 2015
19
28. In Smt. Maneka Gandhi v. Union of India and Anr.,
AIR 1978 SC 597, which is a decision of great
jurisprudence significance in our Constitutional law. Chief
Justice Beg, in a concurring but different opinion held that
an order impounding a passport is a quasi-judicial decision
(Para 34, page 612). The learned Chief Justice also held
when an administrative action involving any deprivation of
or restriction on fundamental rights is taken, the
authorities must see that justice is not only done but
manifestly appears to be done as well. This principle would
obviously demand disclosure of reasons for the decision.
29. Justice Y.V. Chandrachud (as His Lordship then was)
in a concurring but a separate opinion also held that
refusal to disclose reasons for impounding a passport is an
exercise of an exceptional nature and is to be done very
sparingly and only when it is fully justified by the
exigencies of an uncommon situation.
30. The learned Judge further held that law cannot permit
any exercise of power by an executive to keep the reasons
undisclosed if the only motive- for doing so is to keep the
reasons away from judicial scrutiny. (See para 39 page
613).
31. In Rama Varma Bharathan Thampuran v. State of
Kerala and Ors., AIR 1979 SC 1918, Justice V.R. Krishna
Iyer speaking for a three-Judge Bench held that the
functioning of the Board was quasi-judicial in character.
One of the attributes of quasi-judicial functioning is the
recording of reasons in support of decisions taken and the
other requirement is following the principles of natural
justice. Learned Judge held that natural justice requires
reasons to be written for the conclusions made (See para
14 page 1922).
32. In Gurdial Singh Fijji v. State of Punjab and Ors.,
(1979) 2 SCC 368, this Court, dealing with a service
matter, relying on the ratio in Capoor (supra), held that
“rubber-stamp reason” is not enough and virtually quoted
the observation in Capoor (supra) to the extent that
Service Tax Appeal No.70006 of 2015
20
reasons “are the links between the materials on which
certain conclusions are based and the actual conclusions.”
(See para 18 page 377).
33. In a Constitution Bench decision of this Court in Shri
Swamiji of Shri Admar Mutt etc. etc. v. The Commissioner,
Hindu Religious and Charitable Endowments Dept. and
Ors., AIR 1980 SC 1, while giving the majority judgment
Chief Justice Y.V. Chandrachud referred to Broom‟s Legal
Maxims (1939 Edition, page 97) where the principle in
Latin runs as follows :
“Ces-sante Ratione Legis Cessat Ipsa Lex”
34. The English version of the said principle given by the
Chief Justice is that :
“Reason is the soul of the law, and when the reason
of any particular law ceases, so does the Law itself.”
(See para 29 page 11)
35. In M/s. Bombay Oil Industries Pvt. Ltd. v. Union of
India and Others, AIR 1984 SC 160, this Court held that
while disposing of applications under Monopolies and
Restrictive Trade Practices Act the duty of the Government
is to give reasons for its order. This court made it very
clear that the faith of the people in administrative tribunals
can be sustained only if the tribunals act fairly and dispose
of the matters before them by well considered orders. In
saying so, this Court relied on its previous decisions in
Capoor (supra) and Siemens Engineering (supra),
discussed above.
36. In Ram Chander v. Union of India and Others, AIR
1986 SC 1173, this Court was dealing with the appellate
provisions under the Railway Servants (Discipline and
Appeal) Rules, 1968 condemned the mechanical way of
dismissal of appeal in the context of requirement of Rule
22(2) of the aforesaid Rule. This Court held that the word
“consider” occurring to the Rule 22(2) must mean the
Railway Board shall duly apply its mind and give reasons
for its decision. The learned Judges held that the duty to
give reason is an incident of the judicial process and
Service Tax Appeal No.70006 of 2015
21
emphasized that in discharging quasi-judicial functions the
appellate authority must act in accordance with natural
justice and give reasons for its decision (Para 4, page
1176).
37. In M/s. Star Enterprises and Others v. City and
Industrial Development Corporation of Maharashtra Ltd.
and Others, (1990) 3 SCC 280, a three-Judge Bench of
this Court held that in the present day set up judicial
review of administrative action has become expansive and
is becoming wider day by day and the State has to justify
its action in various field of public law. All these necessitate
recording of reason for executive actions including the
rejection of the highest offer. This Court held that
disclosure of reasons in matters of such rejection provides
an opportunity for an objective review both by superior
administrative heads and for judicial process and opined
that such reasons should be communicated unless there
are specific justification for not doing so (see Para 10,
page 284-285).
38. In Maharashtra State Board of Secondary and Higher
Secondary Education v. K.S. Gandhi and Others, (1991) 2
SCC 716, this Court held that even in domestic enquiry if
the facts are not in dispute non-recording of reason may
not be violative of the principles of natural justice but
where facts are disputed necessarily the authority or the
enquiry officer, on consideration of the materials on
record, should record reasons in support of the conclusion
reached (see para 22, pages 738-739).
39. In the case of M.L. Jaggi v. Mahanagar Telephones
Nigam Limited and Others, (1996) 3 SCC 119, this Court
dealt with an award under Section 7 of the Telegraph Act
and held that since the said award affects public interest,
reasons must be recorded in the award. It was also held
that such reasons are to be recorded so that it enables the
High Court to exercise its power of judicial review on the
validity of the award, (see para 8, page 123).
Service Tax Appeal No.70006 of 2015
22
40. In Charan Singh v. Healing Touch Hospital and
Others, AIR 2000 SC 3138, a three-Judge Bench of this
Court, dealing with a grievance under CP Act, held that the
authorities under the Act exercise quasi-judicial powers for
redressal of consumer disputes and it is, therefore,
imperative that such a body should arrive at conclusions
based on reasons. This Court held that the said Act, being
one of the benevolent pieces of legislation, is intended to
protect a large body of consumers from exploitation as the
said Act provides for an alternative mode for consumer
justice by the process of a summary trial. The powers
which are exercised are definitely quasi-judicial in nature
and in such a situation the conclusions must be based on
reasons and held that requirement of recording reasons is
“too obvious to be reiterated and needs no emphasizing”.
(See Para 11, page 3141 of the report)
41. Only in cases of Court Martial, this Court struck a
different note in two of its Constitution Bench decisions,
the first of which was rendered in the case of Som Datt
Datta v. Union of India and Others, AIR 1969 SC 414, Mr.
Justice Ramaswami delivering the judgment for the
unanimous Constitution Bench held that provisions of
Sections 164 and 165 of the Army Act do not require an
order confirming proceedings of Court Martial to be
supported by reasons. The Court held that an order
confirming such proceedings does not become illegal if it
does not record reasons. (Para 10, page 421- 422 of the
report).
42. About two decades thereafter, a similar question
cropped up before this Court in the case of S.N. Mukherjee
v. Union of India, AIR 1990 SC 1984. Aunanimous
Constitution Bench speaking through Justice S.C. Agrawal
confirmed its earlier decision in Som Datt (supra) in para
47 at page 2000 of the report and held reasons are not
required to be recorded for an order confirming the finding
and sentence recorded by the Court Martial.
Service Tax Appeal No.70006 of 2015
23
43. It must be remembered in this connection that the
Court Martial as a proceeding is sui generis in nature and
the Court of Court Martial is different, being called a Court
of Honour and the proceeding therein are slightly different
from other proceedings. About the nature of Court Martial
and its proceedings the observations of Winthrop in
Military Law and Precedents are very pertinent and are
extracted herein below :
“Not belonging to the judicial branch of the
Government, it follows that courts-martial must
pertain to the executive department; and they are in
fact simply instrumentalities of the executive power,
provided by Congress for the President as
Commander-in-Chief, to aid him in properly
commanding the Army and Navy and enforcing
discipline therein, and utilized under his orders or
those of his authorized military representatives.”
44. Our Constitution also deals with Court Martial
proceedings differently as is clear from Articles 33, 136(2)
and 227(4) of the Constitution.
45. In England there was no common law duty of
recording of reasons. In Marta Stefan v. General Medical
Council, (1999) 1 WLR 1293, it has been held, “the
established position of the common law is that there is no
genera], duty imposed on our decision makers to record
reasons”. It has been acknowledged in the Justice Report,
Administration Under Law (1971) at page 23 that “No
single factor has inhibited the development of English
administrative law as seriously as the absence of any
general obligation upon public authorities to give reasons
for their decisions”.
46. Even then in the case of R v. Civil Service Appeal
Board, ex parte Cunningham reported in (1991) 4 All ER
310, Lord Donaldson, Master of Rolls, opined very strongly
in favour of disclosing of reasons in a case where the Court
is acting in its discretion. The learned Master of Rolls said :
Service Tax Appeal No.70006 of 2015
24
“..It is a corollary of the discretion conferred upon
the board that it is their duty to set out their
reasoning in sufficient form to show the principles on
which they have proceeded. Adopting Lord Lane CJ‟s
observations (in R v. Immigration Appeal Tribunal,
ex p Khan (Mahmud) [1983] 2 All ER 420 at 423,
(1983) QB 790 at 794-795), the reasons for the
lower amount is not obvious. Mr. Cunningham is
entitled to know, either expressly or inferentially
stated, what it was to which the board were
addressing their mind in arriving at their conclusion.
It must be obvious to the board that Mr.
Cunningham is left with a burning sense of
grievance. They should be sensitive to the fact that
he is left with a real feeling of injustice, that having
been found to have been unfairly dismissed, he has
been deprived of his just desserts (as he sees
them)”.
47. The learned Master of Rolls further clarified by saying
:
“..thus, in the particular circumstances of this case,
and without wishing to establish any precedent
whatsoever, I am prepared to spell out an obligation
on this board to give succinct reasons, if only to put
the mind of Mr. Cunningham at rest. I would
therefore allow this application.”
48. But, however, the present trend of the law has been
towards an increasing recognition of the duty of Court to
give reasons (See North Range Shipping Limited v.
Seatrans Shipping Corporation, (2002) 1 WLR 2397). It
has been acknowledged that this trend is consistent with
the development towards openness in Government and
judicial administration.
49. In English v. Emery Reimbold and Strick Limited,
(2002) 1 WLR 2409, it has been held that justice will not
be done if it is not apparent to the parties why one has
won and the other has lost. The House of Lords in Cullen v.
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25
Chief Constable of the Royal Ulster Constabulary, (2003) 1
WLR 1763, Lord Bingham of Cornhill and Lord Steyn, on
the requirement of reason held, “First, they impose a
discipline ... which may contribute to such decisions being
considered with care. Secondly, reasons encourage
transparency ... Thirdly, they assist the Courts in
performing their supervisory function if judicial review
proceedings are launched.” (Para 7, page. 1769 of the
report)
50. The position in the United States has been indicated
by this Court in S.N. Mukherjee (supra) in paragraph 11 at
page 1988 of the judgment. This Court held that in the
United States the Courts have always insisted on the
recording of reasons by administrative authorities in
exercise of their powers. It was further held that such
recording of reasons is required as “the Court cannot
exercise their duty of review unless they are advised of the
considerations underlying the action under review”. In S.N.
Mukherjee (supra) this court relied on the decisions of the
U.S. Court in Securities and Exchange Commission v.
Chenery Corporation, (1942) 87 Law Ed 626 and John T.
Dunlop v. Walter Bachowski, (1975) 44 Law Ed 377 in
support of its opinion discussed above.
51. Summarizing the above discussion, this Court holds :
(a) In India the judicial trend has always been to record
reasons, even in administrative decisions, if such
decisions affect anyone prejudicially.
(b) A quasi-judicial authority must record reasons in
support of its conclusions.
(c) Insistence on recording of reasons is meant to serve
the wider principle of justice that justice must not
only be done it must also appear to be done as well.
(d) Recording of reasons also operates as a valid
restraint on any possible arbitrary exercise of judicial
and quasi-judicial or even administrative power.
Service Tax Appeal No.70006 of 2015
26
(e) Reasons reassure that discretion has been exercised
by the decision maker on relevant grounds and by
disregarding extraneous considerations.
(f) Reasons have virtually become as indispensable a
component of a decision making process as
observing principles of natural justice by judicial,
quasi-judicial and even by administrative bodies.
(g) Reasons facilitate the process of judicial review by
superior Courts.
(h) The ongoing judicial trend in all countries committed
to rule of law and constitutional governance is in
favour of reasoned decisions based on relevant facts.
This is virtually the Life blood of judicial decision
making justifying the principle that reason is the soul
of justice.
(i) Judicial or even quasi-judicial opinions these days
can be as different as the judges and authorities who
deliver them. All these decisions serve one common
purpose which is to demonstrate by reason that the
relevant factors have been objectively considered.
This is important for sustaining the litigants‟ faith in
the justice delivery system.
(j) Insistence on reason is a requirement for both
judicial accountability and transparency.
(k) If a Judge or a quasi-judicial authority is not candid
enough about his/her decision making process then it
is impossible to know whether the person deciding is
faithful to the doctrine of precedent or to principles
of incrementalism.
(l) Reasons in support of decisions must be cogent,
clear and succinct. A pretence of reasons or „rubber-
stamp reasons‟ is not to be equated with a valid
decision making process.
(m) It cannot be doubted that transparency is the sine
qua non of restraint on abuse of judicial powers.
Transparency in decision making not only makes the
judges and decision makers less prone to errors but
Service Tax Appeal No.70006 of 2015
27
also makes them subject to broader scrutiny. (See
David Shapiro in Defence of Judicial Candor (1987)
100 Harward Law Review 731-737).
(n) Since the requirement to record reasons emanates
from the broad doctrine of fairness in decision
making, the said requirement is now virtually a
component of human rights and was considered part
of Strasbourg Jurisprudence. See (1994) 19 EHRR
553, at 562 para 29 and Anya v. University of
Oxford, 2001 EWCA Civ 405, wherein the Court
referred to Article 6 of European Convention of
Human Rights which requires, “adequate and
intelligent reasons must be given for judicial
decisions”.
(o) In all common law jurisdictions judgments play a
vital role in setting up precedents for the future.
Therefore, for development of law, requirement of
giving reasons for the decision is of the essence and
is virtually a part of “Due Process”.
52. For the reasons aforesaid, we set aside the order of
the National Consumer Disputes Redressal Commission
and remand the matter to the said forum for deciding the
matter by passing a reasoned order in the light of the
observations made above. Since some time has elapsed,
this Court requests the forum to decide the matter as early
as possible, preferably within a period of six weeks from
the date of service of this order upon it.”
4.7 Thus, we set aside the impugned order and remand the
matter back to adjudicating authority for reconsideration of the
matter in light of the observations made in the Final Order No.
ST/A/55630/2013 dated 19.02.2013. We make it clear and
direct the adjudicating authority to reconsider the matter
threadbare on the basis of facts, figures, evidences and
submissions that will be made by the appellant before him.
5.1 Appeal is allowed and matter remanded back to original
authority for de novo adjudication.
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28
5.2 As the matter is quite old we would direct the adjudicating
authority to decide the matter in remand proceedings within
three months of receipt of this order following the principles of
natural justice.
(Order pronounced in open court on-01 September, 2026)
(P.A. AUGUSTIAN)
MEMBER (JUDICIAL)
(SANJIV SRIVASTAVA)
MEMBER (TECHNICAL)
akp