Facts of the Case

The appellant, Radico Khaitan Limited, was issued a show cause notice alleging liability to pay service tax amounting to ₹1.37 crore for services received from M/s Jefferies International Limited (JIL) during FY 2006–07 under the Finance Act, 1994.

The Revenue relied on a letter of engagement dated 20.04.2006 (MOU) to claim tax liability. However, the appellant contended that a subsequent legally binding agreement dated 30.06.2006 governed the transaction and superseded the earlier MOU.

The Commissioner accepted the appellant’s contention, holding that the later agreement was valid and binding, and accordingly dropped the demand.

The Revenue appealed before CESTAT, which remanded the matter for fresh adjudication. Aggrieved by this broad remand, the appellant approached the Delhi High Court under Section 35G.

Issues Involved

  1. Whether the CESTAT was justified in remanding the matter for de novo adjudication without deciding key issues.
  2. Whether the agreement dated 30.06.2006 was the binding document governing the transaction.
  3. Whether CESTAT can pass a general remand order without adjudicating facts and law.

Petitioner’s Arguments (Appellant)

  • The Commissioner had already given detailed findings on both:
    • genuineness of the agreement dated 30.06.2006, and
    • its legal interpretation.
  • The Revenue’s appeal did not seriously dispute the genuineness of the agreement.
  • Therefore, a blanket remand by CESTAT on all issues was unjustified and excessive.
  • The Tribunal failed to discharge its duty as a final fact-finding authority.

Respondent’s Arguments (Revenue)

  • The agreement dated 30.06.2006 was produced only at the reply stage, and hence could not be verified earlier.
  • There were material differences between the MOU (20.04.2006) and the subsequent agreement, requiring fresh examination.
  • The remand order was justified to verify:
    • genuineness of documents, and
    • nature of services (underwriting vs financial services).

Court’s Findings / Judgment

  • The High Court observed that the Commissioner had already recorded elaborate findings on:
    • genuineness of the agreement, and
    • its interpretation.
  • CESTAT, being the final fact-finding authority, cannot:
    • mechanically remand matters,
    • or abdicate its adjudicatory responsibility.
  • The Court criticized the practice of routine remand orders, calling it “unhealthy”.
  • If doubt existed regarding genuineness, the Tribunal should have:
    • restricted remand only to that issue,
    • and retained the appeal for final adjudication. 

Court Order

  • The impugned CESTAT order was set aside.
  • The Tribunal was directed to:
    • decide the matter on merits, and
    • seek limited remand only on the issue of genuineness of the agreement, if necessary.
  • Appeal allowed in favour of the appellant.

Important Clarification / Legal Principle

  • CESTAT cannot pass mechanical or open-ended remand orders.
  • As a final fact-finding body, it must:
    • adjudicate both facts and law,
    • avoid unnecessary remands, and
    • restrict remand strictly to specific issues where required.
  • Subsequent binding agreements supersede earlier MOUs when clearly established.

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:4249-DB/AKC17072018SERTA192018.pdf

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