Rajasthan High Court – Jodhpur
M/S Gyankeer Tobacco Products Pvt. Ltd vs Additional Commissioner … on 16 April, 2026
[2026:RJ-JD:16087-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Civil Writ Petition No. 18915/2024
1. M/s Gyankeer Tobacco Products Pvt. Ltd., Having its
Registered Office At NH 8, Upli Oden, Nathdwara,
Rajsamand-313301, Rajasthan, Through Its Authorized
Signatory Shri Suresh Kumar Keer, S/o Devi Lal Keer,
Aged About 39 Years, R/o Upla Chorahya, Upali Odan,
Rajsamand, Rajasthan-313301.
2. Suresh Kumar Keer, Director Of M/s Gyankeer Tobacco
Products Pvt. Ltd., S/o Devi Lal Keer, Aged About 39
Years, R/o Upla Chorahya, Upali Odan, Rajsamand,
Rajasthan-313301.
----Petitioners
Versus
1. Additional Commissioner, Central Excise And Central
Goods and Services Tax Commissionerate, H-Block, 100
Feet Road, Sector-14, Hiran Magri, Udaipur, Rajasthan.
2. Rajasthan Appellate Authority For Advance Ruling, Goods
And Service Tax, NCR Buidling, Statute Circle, C-Scheme,
Jaipur, Rajasthan-302005.
3. Rajasthan Authority For Advance Ruling, Goods and
Services Tax, Kar Bhawan, Ambedkar Circle, Near
Rajasthan High Court, Jaipur, Rajasthan-302005.
4. Deputy Commissioner, State Tax, Zone-Bhilwara, Circle-
II, Commercial Taxes Department, Rajasmand, Rajasthan
----Respondents
For Petitioner(s) : Mr. Sanjay Jhanwar, Sr. Advocate
assisted by Mr. Falgun Buch
Mr. Prateek Gattani
Mr. Gopal Krishan Chhangani
Mr. Vishal Singh
Mr. Rahul Lakhwani
Mr. Wilson Joy
For Respondent(s) : Mr. Mahaveer Bishnoi, AAG with
Mr. Harshvardhan Singh
Mr. Rajvendra Saraswat with
Mr. Rishabh Dadhich
Mr. Jitesh Kumar Suthar
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HON'BLE THE ACTING CHIEF JUSTICE MR. SANJEEV PRAKASH SHARMA
HON'BLE MR. JUSTICE BALJINDER SINGH SANDHU
Judgment
1. Date of Conclusion of Arguments : 25.02.2026
2. Date on which judgment was reserved : 25.02.2026
3. Whether the full judgment or only
operative part is pronounced : Full
4. Date of pronouncement : 16.04.2026
Per: Baljinder Singh Sandhu, J.
FACTS OF THE CASE
1. The instant petition is filed by the petitioner challenging the
validity of the impugned show cause notices both dated 8th
August 2024 issued by the Additional Commissioner, Central
Excise and Central Goods Services Commissionerate, Udaipur
(herein after referred to as Respondent No. 1) under Section 74 of
the Central Goods and Services Act, 2017 (hereinafter referred to
as CGST Act) and Section 11A with 11AA and 11AC of the Central
Excise Act, 1944 (hereinafter referred to as Central Excise Act)
proposing the demand of GST of Rs. 195,06,61,336/- and Central
Excise Duty of Rs. 71,34,39,871/- along with interest and
equivalent penalty.
2. The brief facts leading to filing of the petition are that the
Petitioner filed an application for Advance Ruling under Section 97
of the Rajasthan Goods and Services Act (hereinafter referred to
as RGST Act) before Rajasthan Authority For Advance Ruling,
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Goods And Services Tax, Jaipur (hereinafter referred to as AAR)
seeking an Advance Ruling with respect to the classification of its
product as unmanufactured tobacco pre-mixed with lime (i.e.,
supplied without lime tube) under the brand name 'Keer Kokil' (the
Product intended to be sold by the Petitioner) under GST and the
rate of GST and Compensation Cess applicable on the same. In
the Advance Ruling Application and vide its letters dated 09th May
2022 and 16th May 2022, the Petitioner stated that the Product is
unmanufactured tobacco pre-mixed with lime along with addition
of certain aroma and menthol for freshness and to avoid bad
smell, prepared either using machines or manually.
3. Deputy Commissioner, State Tax, Commercial Taxes
Department, Rajsamand (hereinafter referred to as Respondent
No. 4), being the Jurisdictional Officer of the Petitioner, vide letters
dated 18th January 2022 and 10th May 2022 submitted its
comments that the Product falls under the category of
unmanufactured tobacco without lime tube and that the Product
would be supplied to the customers pre-mixed with lime and there
will be no change in the tobacco leaves in the process.
4. AAR passed the Advance Ruling dated 1st June 2022
declaring that the Product is 'unmanufactured tobacco' classifiable
under CTH 24012090- 'Others', attracting GST at 28% and
Compensation Cess at 71%.
5. After elapse of about eleven months' time, Respondent
No.1 initiated an investigation against the Petitioner on the
allegation that the Petitioner was not preparing the Product as per
the Advance Ruling.
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6. Thereafter, Respondent No. 1 filed a complaint/letter dated
4th May 2023 before AAR alleging that the Petitioner was misusing
the Advance Ruling and therefore, alleging that the Advance
Ruling was obtained by misrepresentation and suppression of
facts.
7. To which the AAR passed an order dated 10th July 2023
rejecting the complaint/letter dated 4th May 2023 of Respondent
No. 1 and re-confirmed the Advance Ruling holding that all the
material facts and information were placed on record before the
AAR.
8. Thereafter, Respondent No. 1 filed an appeal before
Rajasthan Appellate Authority for Advance Ruling, Goods and
Service Tax, Jaipur (hereinafter referred to as Appellate Authority)
under Section 100 of CGST Act against the order dated 10th July
2023 passed by AAR was dismissed due to the reason that the
provisions of CGST Act do not provide for appeal against order in
review passed by AAR under Section 104.
9. Eventually, Respondent No. 1, invoking Section 74 of the
CGST Act as well as Section 11A of the Central Excise Act, issued
the Impugned Show Cause Notices proposing the demand of GST
and Central Excise Duty on the same allegations that were raised
before AAR and Appellate Authority that the Advance Ruling was
obtained by fraud, misrepresentation and suppression of facts.
SUBMISSIONS ON BEHALF OF THE PETITIONER
10. At the outset it is submitted by the counsel for the petitioner
that the petitioner is a bona fide, tax-compliant entity that has
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consistently discharged GST in accordance with the Advance
Ruling, which classified its product as 'unmanufactured tobacco'
under CTH 2401 2090-"others", attracting 28% GST and 71%
Compensation Cess. At the time of seeking the ruling, the
petitioner had made full and complete disclosure of all relevant
facts, including the manufacturing process, use of machines, and
addition of aroma and menthol. These aspects were specifically
examined by both the AAR and the jurisdictional officer, who
concurred that such processes do not alter the essential character
of the product. It is stated that even the Respondent No. 4, being
the Jurisdictional Officer of the Petitioner, in his comments
recognised use of machines and stated that there will be no
change in the nature of the Product after adding a little aroma and
menthol.
11. The Advance Ruling, having been passed after due
consideration, attained finality as it was not challenged within the
prescribed limitation. The department subsequently attempted to
invoke Section 104, based upon a search conducted by the
Department at the business/registered premises of the petitioner
on 25th April 2023, to declare the ruling void on allegations of
fraud, suppression, and misrepresentation, however, the AAR
categorically rejected these allegations, holding that there was no
failure of disclosure on the part of the petitioner. The appeal
preferred thereafter was also dismissed as not maintainable,
thereby reaffirming the finality of the ruling.
12. Despite having failed in the aforesaid proceedings, the very
same jurisdictional officer who had filed application under Section
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104 before AAR, and had filed the appeal under Section 100, has
issued the impugned show cause notices under Section 74 on
identical grounds, alleging misclassification of the product as
manufactured chewing tobacco. This action, in effect, amounts to
a collateral and impermissible challenge to a binding Advance
Ruling as well as to prior adjudicatory orders that have already
attained finality.
13. In the absence of any fresh material or any established fraud
or suppression, the essential jurisdictional preconditions for
invoking Section 74 are clearly not satisfied. The impugned
notices, therefore, are without jurisdiction, contrary to settled
legal principles, and constitute a clear abuse of process.
SUBMISSIONS OF BEHALF OF THE RESPONDENTS
14. Learned counsel for the respondents has raised a preliminary
objection to the maintainability of the writ petition, submitting
that only show cause notices have been issued and no final
decision has yet been taken. The petition is therefore premature,
and the petitioner has the remedy of filing a reply and availing
statutory remedies. It is further submitted that the matter
involves disputed questions of fact regarding the actual
manufacturing process adopted by the petitioner, which ought to
be examined by the adjudicating authority and not in writ
jurisdiction. On these grounds, the writ petition deserves
dismissal.
15. It is further submitted that GST authorities are empowered
to initiate investigation where there is reason to believe that
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material facts were suppressed or misrepresented. The
department is entitled to verify whether the Advance Ruling is
being correctly followed and to reclassify goods if additional or
undisclosed ingredients or processes amount to a substantial
deviation. Classification depends on the actual manufacturing
process and product characteristics, irrespective of earlier
declarations, and such action does not require setting aside the
Advance Ruling but is part of lawful tax administration.
16. It is also submitted that the show cause notices have been
issued strictly in accordance with the GST law to address
discrepancies, notwithstanding prior rulings. An Advance Ruling
does not bar fresh proceedings where subsequent facts indicate
non-compliance or misrepresentation. Use of machines and
addition of aroma or menthol, if not disclosed, constitute valid
grounds for investigation and reclassification, amounting to fraud
or suppression. The notices are based on fresh findings and are
distinct from earlier proceedings, justifying invocation of Section
74 of the GST Act and Section 11A of the Central Excise Act.
17. The counsel contends that although the petitioner obtained
an Advance Ruling classifying its product 'Keer Kokil' as
unmanufactured tobacco under CTH 2401 2090-"others", it was
subsequently found that the petitioner is manufacturing tobacco
using machines and adding substances such as nutmeg aroma and
mentha oil. This, according to the respondents, changes the
nature of the product, bringing it within the category of
manufactured chewing tobacco, different from what was presented
before the AAR.
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18. It is further submitted that the use of machines and
additional ingredients, allegedly not disclosed earlier, constitutes a
substantial deviation justifying investigation and reclassification.
Based on samples collected, the department asserts that the
product is manufactured chewing tobacco falling under CTH 2403
9910. Hence, the department has validly exercised its statutory
powers based on findings of misrepresentation, and the petitioner
should avail the alternative remedy. Accordingly, the petition
deserves to be dismissed.
ANALYSIS AND FINDINGS
19. Heard learned counsel for the parties and perused the
material available on record. The Court has given thoughtful
consideration to the rival submissions advanced on behalf of the
petitioner as well as the respondents.
20. At the first instance, we consider the preliminary objections
raised by the Respondents about the maintainability of the writ
against the show cause notice and an alternate remedy being
available to the petitioner of approaching the department.
21. The Hon'ble Apex Court has made it clear that availability of
an alternative remedy does not operate as an absolute bar to the
"maintainability" of a writ petition and that the rule, which
requires a party to pursue the alternative remedy provided by a
statute, is a rule of policy, convenience and discretion rather than
a rule of law. Hence, the mere fact that the petitioner before this
court, in the given case, has not pursued the alternative remedy
available to him cannot mechanically be construed as a ground for
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its dismissal. A Constitutional Bench of the Hon'ble Apex Court in
the case of State of Uttar Pradesh vs. Mohd. Nooh1 has
observed as under :-
"10. In the next place it must be borne in mind that
there is no rule, with regard to certiorari as there is with
mandamus, that it will lie only where there is no other
equally effective remedy. It is well established that,
provided the requisite grounds exist, certiorari will lie
although a right of appeal has been conferred by statute,
the fact that the aggrieved party has another and
adequate remedy may be taken into consideration by the
superior court in arriving at a conclusion as to whether it
should, in exercise of its discretion, issue a writ of
certiorari to quash the proceedings and decisions of
inferior courts subordinate to it and ordinarily the superior
court will decline to interfere until the aggrieved party has
exhausted his other statutory remedies, if any. But this
rule requiring the exhaustion of statutory remedies before
the writ will be granted is a rule of policy, convenience and
discretion rather than a rule of law and instances are
numerous where a writ of certiorari has been issued in
spite of the fact that the aggrieved party had other
adequate legal remedies."
22. In the recent judgment passed in J. Sri Nisha Vs. The
Special Director2, the Hon'ble Apex court relying on Union Of
India Vs. VICCO Laboratories3, has clearly held that
interference at the stage of SCN is permissible where the notice
suffers from patent lack of jurisdiction, reflects non-application of
mind, is issued with a pre-determined or premeditated approach,
amounts to an abuse of the process of law, or results in a violation
of the principles of natural justice. It has been observed as
under :-
"32. Thus, a prima facie satisfaction was recorded by the
Competent Authority that there was no evidence of the
appellants being involved in foreign security transactions
having any value. Consequently, it has to be taken that
there did not exist the "reasons to believe" referred to in
Sub-section (1) of Section 37A. These findings definitely
support the cause of the appellants herein. It is not in
dispute that the appeal preferred by the Department
against the order dated 3rd February, 2021, is still pending
consideration. The Division Bench of the High Court, while
1 1958 SCR 595
2 2026 INSC 309
3 (2007) 13 SCC 270
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deciding the writ appeal, observed that the writ petition
against the SCN is not entertainable. We feel that the said
observation may not be correct in every situation. This
Court has consistently held that although ordinarily a writ
petition against an SCN may not be entertained, however,
the said proposition is not an inviolable rule. Interference
at the stage of SCN is permissible in exceptional
circumstances, such as where the notice suffers from
patent lack of jurisdiction, reflects non-application of mind,
is issued with a pre-determined or premeditated approach,
amounts to an abuse of the process of law, or results in a
violation of the principles of natural justice. In such
situations, the High Court would be justified in exercising
its jurisdiction under Article 226 of the Constitution to
prevent manifest injustice. In this context, we may
gainfully refer to the following observations from Union of
India v. VICCO Laboratories :-
"31. Normally, the writ court should
not interfere at the stage of issuance of
show-cause notice by the authorities. In
such a case, the parties get ample
opportunity to put forth their contentions
before the authorities concerned and to
satisfy the authorities concerned about the
absence of case for proceeding against the
person against whom the show-cause
notices have been issued. Abstinence from
interference at the stage of issuance of
show-cause notice in order to relegate the
parties to the proceedings before the
authorities concerned is the normal rule.
However, the said rule is not without
exceptions. Where a show-cause notice is
issued either without jurisdiction or in an
abuse of process of law, certainly in that
case, the writ court would not hesitate to
interfere even at the stage of issuance of
show-cause notice. The interference at the
show-cause notice stage should be rare
and not in a routine manner. Mere
assertion by the writ petitioner that notice
was without jurisdiction and/or abuse of
process of law would not suffice. It should
be prima facie established to be so. Where
factual adjudication would be necessary,
interference is ruled out."
23. In the present case, the petitioner contends that the
impugned show cause notices have been issued on grounds which
were already considered by the Authority for Advance Ruling, and
that proceedings under Section 104 as well as the appellate
proceedings have culminated against the Revenue. Prima facie,
these submissions raise a substantial issue as to whether the
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impugned notices seek to reopen matters that have already
attained finality.
24. In such circumstances, and in view of the settled position of
law that a writ petition is maintainable where a show cause notice
is alleged to be without jurisdiction, issued with a pre-determined
approach, or amounts to an abuse of process of law, this Court
finds it appropriate to entertain the present writ petition. This is
particularly so when the challenge pertains to the very assumption
of jurisdiction under Section 74 of the CGST Act on facts already
adjudicated and having attained finality.
25. The objection regarding disputed questions of fact does not
merit acceptance, in as much as the foundational facts relating to
the manufacturing process, use of machines, and addition of
aroma and menthol were already placed before and considered by
the Authority for Advance Ruling as well as in proceedings under
Section 104. The present case does not involve any fresh factual
adjudication but an attempt to revisit settled issues. Accordingly,
the preliminary objections raised by the respondents are rejected,
leaving the merits of the case to be considered hereinafter.
26. Having dealt with the preliminary objections, the principal
issue that arises for consideration is whether, in the absence of
any material establishing fraud, willful misstatement or
suppression of facts, the respondent could have assumed
jurisdiction under Section 74 of the CGST Act and Section 11A of
the Central Excise Act and issued the impugned show cause
notices, notwithstanding a binding Advance Ruling.
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27. Section 103 of CGST Act provides that any Advance Ruling
passed by any Authority for Advance Ruling or Appellate Authority
for Advance Ruling shall be applicable on the applicant (the
Petitioner in the present case) and the concerned officer or the
jurisdictional officer, unless there is a change in law or in the facts
and circumstances on which the Advance Ruling was based.
28. The Advance Ruling mechanism is intended to provide
certainty and clarity to taxpayers regarding their tax liability in
advance, thereby enabling them to structure their transactions in
accordance with law. It serves as a mechanism to resolve
potential disputes at an early stage and reduce unnecessary
litigation. The binding nature of such rulings on both the applicant
and the jurisdictional authorities reflects the legislative intent to
ensure consistency and finality in tax administration. Any attempt
to reopen issues already settled, in the absence of any change in
law or facts, would defeat the object of the scheme. Therefore,
unless the conditions under Section 104 are satisfied or there is a
change in facts or law, the binding effect of the Advance Ruling
cannot be disregarded.
29. The Hon'ble Apex Court in National Cooperative
Development Corporation vs. CIT4 emphasized that a robust
Advance Ruling system reduces litigation and promotes tax
certainty, and cautioned that it should not become another stage
of litigation. It was held as under :-
"55. In our opinion, a vibrant system of Advance Ruling
can go a long way in reducing taxation litigation. This is not
only true of these kinds of disputes but even disputes
between the taxation department and private persons, who
are more than willing to comply with the law of the land but
4 (2021) 11 SCC 357
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find some ambiguity. Instead of first filing a return and then
facing consequences from the Department because of a
different perception which the Department may have, an
Advance Ruling System can facilitate not only such a
resolution, but also avoid the tiers of litigation which such
cases go through as in the present case. In fact, before
further discussing this Advance Ruling System, we can
unhesitatingly say that, at least, for CPSEs and Government
authorities, there would be no question of taking this matter
further once an Advance Ruling is delivered, and even in
case of private persons, the scope of any further challenge
is completely narrowed down.
........
63. The aim of any properly framed Advance Ruling system
ought to be a dialogue between taxpayers and Revenue
Authorities to fulfill the mutually beneficial purpose for
taxpayers and Revenue Authorities of bolstering tax
compliance and boosting tax morale. This mechanism
should not become another stage in the litigation process.”
30. A plain reading of Section 74 of the CGST Act makes it
evident that the assumption of jurisdiction itself is conditional
upon the existence of fraud, willful misstatement or suppression of
facts with intent to evade tax. Section 11A of the Central Excise
Act, 1944 also contains an analogous provision, and the same
principles regarding fraud, willful misstatement or suppression of
facts equally apply. The Hon’ble Supreme Court in Continental
Foundation Joint Venture Holding vs. Commissioner of
Central Excise5 has held that such suppression or misstatement
must be willful and with intent to evade duty. The Court held as
under :-
“11. We are not really concerned with the other
issues as according to us on the challenge to the extended
period of limitation ground alone the appellants are bound
to succeed. Section 11A of the Act postulates suppression
and, therefore, involves in essence mens rea.
12. The expression “suppression” has been used in
the proviso to Section 11A of the Act accompanied by very
strong words as ‘fraud’ or “collusion” and, therefore, has to
be construed strictly. Mere omission to give correct
information is not suppression of facts unless it was
deliberate to stop the payment of duty. Suppression means
failure to disclose full information with the intent to evade
payment of duty. When the facts are known to both the5 (2007) 10 SCC 337
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[2026:RJ-JD:16087-DB] (14 of 19) [CW-18915/2024]parties, omission by one party to do what he might have
done would not render it suppression. When the Revenue
invokes the extended period of limitation under Section 11-
A the burden is cast upon it to prove suppression of fact. An
incorrect statement cannot be equated with a willful
misstatement. The latter implies making an incorrect
statement with the knowledge that the statement was not
correct.
………
14. As far as fraud and collusion are concerned, it is
evident that the intent to evade duty is built into these very
words. So far as mis- statement or suppression of facts are
concerned, they are clearly qualified by the word ‘willful’,
preceding the words “mis-statement or suppression of
facts” which means with intent to evade duty. The next set
of words ‘contravention of any of the provisions of this Act
or Rules’ are again qualified by the immediately following
words ‘with intent to evade payment of duty.’ Therefore,
there cannot be suppression or mis-statement of fact, which
is not willful and yet constitute a permissible ground for the
purpose of the proviso to Section 11A. Mis-statement of fact
must be willful.”
31. Thus, the existence of fraud, willful misstatement or
suppression of facts is not merely a matter for adjudication, but
constitutes a jurisdictional pre-condition for invoking Section 74 of
the CGST Act. While it is true that the department is not precluded
from initiating proceedings where there is a genuine change in
facts or discovery of new material, such power cannot be
exercised to re-open or re-agitate issues which have already been
examined and conclusively decided by a competent authority.
32. In the present case, upon consideration of the record, it is
evident that the petitioner is complying with the Advance Ruling
and paying tax accordingly. The allegation of fraud,
misrepresentation and suppression of facts, forming the basis of
the impugned show cause notices, was specifically raised by the
department in proceedings under Section 104 of the CGST Act and
has been conclusively examined and rejected by the Authority for
Advance Ruling vide order dated 10th July 2023, which has
attained finality.
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33. In such circumstances, the Revenue cannot be permitted to
re-agitate the very same allegations on the same set of facts, in
the absence of any demonstrable fresh material. This is not a case
where sufficiency of material is to be examined, rather it is a case
where the foundational allegation itself stands negated by a
competent authority. Consequently, the assumption of jurisdiction
under Section 74 of the Act is unsustainable in law.
34. The contention of the respondents that the impugned notices
are based on “fresh findings” is not borne out from the record, as
the very allegations regarding use of machines and addition of
aroma and menthol had already been specifically considered in the
Advance Ruling as well as in proceedings under Section 104. The
case of M/s Kavicut Tobacco was also duly considered and
distinguished by the Authority for Advance Ruling, wherein it was
categorically held that mixing lime with tobacco leaves and
addition of volatile flavours does not render unmanufactured
tobacco into manufactured tobacco. Thus, the respondents’ plea of
“fresh findings” stands unsubstantiated.
35. Thus, the issuance of the impugned show cause notices
reflects an attempt to reopen issues which have already attained
finality, without any legal basis. Such an exercise is contrary to the
scheme of the statute and cannot be sustained. It is also in
violation of the settled principle that a subordinate authority is
bound by the findings of a higher or competent authority, unless
such findings are set aside in accordance with law. The Hon’ble
Supreme Court in Union of India v. Kamalakshi Finance
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Corporation6 has held that the principles of judicial discipline
require that orders of appellate authorities must be followed
unreservedly by subordinate authorities :-
“6. Sri Reddy is perhaps right in saying that the
officers were not actuated by any mala fides in passing the
impugned orders. They perhaps genuinely felt that the
claim of the assessee was not tenable and that, if it was
accepted, the Revenue would suffer. But what Sri Reddy
overlooks is that we are not concerned here with the
correctness or otherwise of their conclusion or of any
factual malafides but with the fact that the officers, in
reaching in their conclusion, by-passed two appellate
orders in regard to the same issue which were placed
before them, one of the Collector (Appeals) and the other
of the Tribunal. The High Court has, in our view, rightly
criticised this conduct of the Assistant Collectors and the
harassment to the assessee caused by the failure of these
officers to give effect to the orders of authorities higher to
them in the appellate hierarchy. It cannot be too
vehemently emphasised that it is of utmost importance
that, in disposing of the quasi-judicial issues before them,
revenue officers are bound by the decisions of the
appellate authorities; The order of the Appellate Collector
is binding on the Assistant Collectors working within his
jurisdiction and the order of the Tribunal is binding upon
the Assistant Collectors and the Appellate Collectors who
function under the jurisdiction of the Tribunal. The
principles of judicial discipline require that the orders of the
higher appellate authorities should be followed
unreservedly by the subordinate authorities. The mere fact
that the order of the appellate authority is not “acceptable”
to the department – in itself an objectionable phrase – and
is the subject matter of an appeal can furnish no ground
for not following it unless its operation has been suspended
by a competent court. If this healthy rule is not followed,
the result will only be undue harassment to assessees and
chaos in administration of tax laws.
7. The impression or anxiety of the Assistant
Collector that, if he accepted the assessee’s contention, the
department would lose revenue and would also have no
remedy to have the matter rectified is also incorrect.
Section 35-E confers adequate powers on the department
in this regard. Under Sub-section (1), where the Central
Board of Direct Taxes come across any order passed by the
Collector of Central Excise with the legality or propriety of
which it is not satisfied, it can direct the Collector to apply
to the Appellate Tribunal for the determination of such
points arising out of the decision or order as may be
specified by the Board in its order. Under Sub-section(2)
the Collector of Central Excise, when he comes across any
order passed by an authority subordinate to him, if not
satisfied with this legality or propriety, may direct such
authority to apply to the Collector (Appeals) for the
determination of such points arising out of the decision or
order as may be specified by the Collector of Central Excise
6 AIR 1992 SC 711
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[2026:RJ-JD:16087-DB] (17 of 19) [CW-18915/2024]
in his order and there is a further right of appeal to the
department. The position now, therefore, is that, if any
order passed by an Assistant Collector or Collector is
adverse to the interests of the Revenue, the immediately
higher administrative authority has the power to have the
matter satisfactorily resolved by taking up the issue to the
Appellate Collector or the Appellate Tribunal as the case
may be. In the light of these amended provisions, there
can be no justification for any Assistant Collector or
Collector refusing to follow the order of the Appellate
Collector or the Appellate Tribunal, as the case may be,
even where he may have some reservations on its
correctness. He has to follow the order of the higher
appellate authority. This may instantly cause some
prejudice to the Revenue but the remedy is also in the
hands of the same officer. He has only to bring the matter
to the notice of the Board or the Collector so as to enable
appropriate proceedings being taken under Section.35-E
(1) or (2) to keep the interests of the department alive. If
the officer’s view is the correct one, it will no doubt be
finally upheld and the Revenue will get the duty, though
after some delay which such procedure would entail.
8. We have dealt with this aspect at some length,
because it has been suggested by the learned Additional
Solicitor General that the observations made by the High
Court have been harsh on the officers. It is clear that the
observations of the High Court, seemingly vehement, and
apparently unpalatable to the Revenue, are only intended
to curb a tendency in revenue matters which, if allowed to
become widespread, could result in considerable
harassment to the assesses-public without any benefit to
the Revenue. We would like to say that the department
should take these observations in the proper spirit. The
observations of the High Court should be kept in mind in
future and the utmost regard should be paid by the
adjudicating authorities and the appellate authorities to the
requirements of judicial discipline and the need for giving
effect to the orders of the higher appellate authorities
which are binding on them.”
36. The record reveals that no finding of fraud, willful
misstatement, or suppression of facts has been recorded at any
stage. In the facts of the present case, no such inference can be
drawn, particularly when all material facts stood disclosed and
there is no indication of any intent to evade tax. In such
circumstances, the jurisdictional requirements for invoking Section
74 of the CGST Act are not satisfied.
37. That apart, it is evident from the Advance Ruling dated 1st
June 2022, and the Order dated 10th July 2023 that AAR, as well
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[2026:RJ-JD:16087-DB] (18 of 19) [CW-18915/2024]
as Respondent No. 4, were aware of both the processes involved
in the preparation of the Product, that is, machine-based and
manual and also about use of aroma and menthol, and both have
concluded that the Product is ‘unmanufactured tobacco’. It has
been categorically held that the process of mixing of lime and
tobacco and coating of aroma/menthol does not alter the raw
tobacco, and the product remains ‘unmanufactured tobacco’ only.
The method of preparation, whether manual or machine-based,
also does not alter the nature of the product, which remains
unmanufactured tobacco pre-mixed with lime. Thus, the very
basis for invoking Section 74 does not survive, and the present
proceedings constitute an impermissible attempt to circumvent
the binding effect of the said ruling.
38. It is well settled that when a statutory provision confers
jurisdiction subject to fulfillment of certain conditions, the
existence of such conditions is a sine qua non for valid assumption
of jurisdiction. In the present case, the material relied upon has
already been considered and decided, and in the absence of any
fresh material, the impugned show cause notices are without
jurisdiction and liable to be quashed at the threshold.
39. In view of the foregoing analysis, this Court is of the
considered opinion that the jurisdictional conditions required under
Section 74 of the CGST Act as well as Section 11A of the Central
Excise Act are not satisfied. The attempt to revive allegations of
fraud and suppression, which already stand rejected and have
attained finality, is impermissible in law. The impugned show
cause notices, therefore, cannot be sustained.
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40. Accordingly, the present writ petition is allowed. The
impugned show cause notices dated 8th August 2024 issued by
Respondent No. 1 under Section 74 of the CGST Act and Section
11A of the Central Excise Act, are hereby quashed and set aside
as being without jurisdiction. No order as to costs.
(BALJINDER SINGH SANDHU),J (SANJEEV PRAKASH SHARMA), ACJ
S/1 ms rathore
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