A de novo adjudication must independently assess evidence and record reasoned findings.

M/s Sigma Trade Wings, a partnership firm registered for providing advertising agency services, was alleged to have underpaid service tax during 2004–05 to 2009–10 because the receipts disclosed in its balance sheets and accounts exceeded the taxable value declared in its ST-3 returns.

The Department confirmed a service-tax demand of ₹1,78,36,694, along with interest and penalties under Sections 73, 75, 77 and 78 of the Finance Act, 1994.

The appellant contended that the disputed receipts included non-taxable activities, sale of printed flex and other goods on which VAT had been paid, sale of advertising space in print media, writing advertisements on walls, and collection of municipal advertisement tax.

The Tribunal had earlier set aside the original adjudication order and remanded the matter for a threadbare reconciliation of the ST-3 returns, sales-tax returns, accounts and other evidence, with an opportunity to the appellant to explain any discrepancies.

In the subsequent de novo proceedings, the adjudicating authority relied substantially on the earlier findings, concluded that the appellant had not established payment of VAT for 2007–08 to 2009–10, and confirmed the demand without adequately addressing the appellant’s submissions and evidence.

1. Whether the adjudicating authority, in the de novo proceedings, complied with the Tribunal’s remand directions by undertaking a fresh, reasoned and evidence-based examination of the disputed receipts and tax liability.

2. Whether the impugned order was a valid speaking order consistent with the principles of natural justice, judicial hierarchy and the requirement to record reasons.

3. Whether the service-tax demand, interest and penalties were sustainable on the merits—an issue that was left open for fresh adjudication.

The Tribunal applied the remand directions contained in its earlier Final Order dated 19 February 2013, which required the adjudicating authority to examine the facts, figures and evidence afresh, reconcile the ST-3 and sales-tax returns, obtain relevant information from the sales-tax authorities where necessary, and give the appellant an opportunity to explain discrepancies.

It further applied the principles of natural justice and judicial discipline, under which a subordinate adjudicating authority must comply with the directions of the appellate Tribunal and cannot merely reaffirm findings contained in an order that has been set aside.

Relying on Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan, 2011 (273) E.L.T. 345 (S.C.), the Tribunal reiterated that quasi-judicial authorities must give cogent, clear and succinct reasons, address the material submissions, and disclose the rational nexus between the evidence and the conclusions reached; a non-speaking or “rubber-stamp” order is legally deficient.

The relevant statutory framework comprised Sections 68, 69, 70, 73, 75, 77 and 78 of the Finance Act, 1994, concerning payment, registration, returns, recovery, interest and penalties under the service-tax law.

The Tribunal found that the earlier order had been set aside because it did not adequately analyse the evidence or reconcile the figures. Consequently, the adjudicating authority was required to conduct a genuine de novo examination rather than mechanically adopt the earlier conclusions.

Instead, the authority focused primarily on the communication from the Commercial Tax Department concerning non-payment of VAT for 2007–08 to 2009–10 and then reverted to the findings of the predecessor order.

It did not undertake the required item-wise examination of the receipts, reconcile the accounts with the ST-3 and sales-tax records, or deal with the appellant’s specific claims concerning non-taxable services, sale of goods, print-media advertising space and municipal advertisement-tax collections.

The authority also failed to consider the appellant’s submissions and the precedents specifically directed to be examined.

This amounted to non-application of mind, breach of the Tribunal’s remand directions and violation of natural justice because the order did not provide reasons enabling the appellant or the appellate forum to understand how the demand had been sustained.

It accordingly set aside the impugned order and allowed the appeal by way of remand for fresh de novo adjudication.

The original authority was directed to reconsider the matter threadbare on the basis of the facts, figures, evidence and submissions of the appellant, follow the principles of natural justice, and complete the proceedings within three months of receiving the Tribunal’s order.

The Tribunal did not finally determine the appellant’s substantive service-tax liability, interest or penalties.