Patna High Court – Orders
Siemens Construction Corporation vs Principal Commissioner Of Cgst And … on 29 July, 2026
Author: Alok Kumar Sinha
Bench: Rajeev Ranjan Prasad, Alok Kumar Sinha
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.5828 of 2024
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Siemens Construction Corporation a partnership firm having its office at 21
IAS Colony, Kidwaipuri, District Patna 800001, Bihar through its partner
Rakesh Ranjan (Male, aged about 50 Years) son of Kameshwar Sharma
resident of B-9, Abhiyanta Nagar, P.O.- Ashiana Nagar, Ashiana Nagar,
District Patna 800025, Bihar.
... ... Petitioner/s
Versus
1. Principal Commissioner of CGST and Central Excise having its office at
Central Revenue Building, (Annexe), Bir Chand Patel Path, Patna 800001.
2. Commissioner of CGST and Central Excise, having its office at Central
Revenue Building, (Annexe), Bir Chand Patel Path, Patna.
... ... Respondent/s
Appearance :
For the Petitioner/s : Mr.D.V.Pathy, Sr. Advocate
Mr.Sadashiv Tiwari, Advocate
Mr. Hiresh Karan, Advocate
Ms. Shivani Dewalla, Advocate
For the Respondent/s : Dr. KN.Singh, ASG
Mr. Anshuman Singh, Sr.SC, CGST & CX
Mr. Devansh Shankar, Advocate
Mr. Prabhat Kumar Singh, JC to ASC
Mr. Shivaditya Dhari Sinha, Advocate
======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
and
HONOURABLE MR. JUSTICE ALOK KUMAR SINHA
ORAL ORDER
(Per: HONOURABLE MR. JUSTICE ALOK KUMAR SINHA)
20 29-07-2026
Heard Mr. D.V.Pathy, learned Senior Counsel for the
petitioner and Mr. Anshuman Singh, learned Sr. Standing
Counsel for CGST & CX.
2. The petitioner, in the present writ case, has
prayed for the following reliefs:
“i) The demand cum show cause notice
dated 2 PA issued 24.04.2019 (as contained
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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proposing levy of Service Tax, interest and
penalty without a pre-show cause
consultation as No.1053/02/2017 per Master
Circular CS dated 10.03.2017 issued by the
Central Board of Excise and Customs and
subsequently clarified by Circular dated
19.11.2020 be set aside quashed.
ii) The order dated 04.01.2024 (as
contained in Annexure P 4) passed by the
respondent no. 1 imposing Service Tax,
interest and penalty without consideration of
the written submissions, the exemption
Notification No.25/2012 – Service Tax dated
20.06.2012 issued by the Central
Government; Service Tax (Determination of
Value) Rules, 2006; Notification No. 30/2012
Service Tax dated 20.06.2012 and in
violation of Article 366 (29Ab) read with
Entry 54 of List II of the Constitution of
India on the gross value of the contract as
per Form 26AS and in contravention to
Section 102 of the Finance Act inserted by
the Finance Act, 2016 only on ground that
the agreement was entered into after
31.03.2015 being wholly without jurisdiction
be set aside and quashed.
iii) The order dated 04.01.2024 (as
contained in Annexure -P 4) passed by the
respondent no. 1 imposing Service Tax,
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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the written submissions, the relevant
notifications and the documents filed along
therewith run counter to the settled
principles of natural justice and fair play in
action and as such is wholly illegal and
without jurisdiction?”
3. Although the writ petition has been instituted
seeking several reliefs, during the course of hearing, the learned
Senior Counsel for the petitioner, at the very outset, has
confined this writ application only to seeking relief, as
contained in the prayer no.(ii) of the writ application, whereby
the petitioner has challenged the determination imposing service
tax, interest and penalty, contained in the order dated 04.01.2024
(Annexure-P-4) on the ground that the same has not been
determined in accordance with the provisions contained in the
Service Tax (Determination of Value) Rules, 2006 and is also
not in accordance with Article 366 (29A)(b) of the Constitution
of India. The impugned order dated 04.01.2024 has also been
questioned for not applying/following the Notification No.
30/2012-Service Tax dated 20.06.2012, which provides for
service tax to be paid in equal proportion by the person
providing the service and the person receiving the service.
4. Since the challenge to the impugned order dated
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04.01.2024 (Annexure-P-4) has been confined to the grounds as
stated in the above-mentioned paragraph, therefore, for the
purpose of adjudication of this case, submissions made by the
parties confined to the grounds of challenge, are only being
taken into consideration.
SUBMISSIONS ON BEHALF OF THE
PETITIONER:
5. Learned Senior Counsel for the petitioner submitted
that the petitioner is a partnership firm engaged in the execution
of works contracts for different Government Departments and
Government authorities. In the ordinary course of its business,
the petitioner entered into several work contracts with different
Government agencies, including Bihar Medical Services and
Infrastructure Corporation Ltd., IRCON International Ltd. and
NHPC Ltd., for construction of public infrastructure.It was
submitted that one such agreement dated 17.09.2015 was
executed with Bihar Medical Services and Infrastructure
Corporation Ltd.(Annexure: P/1) for construction of a Central
Library, Emergency Ward, Girls’ Hostel, Lecture Theatres and
Model Record Room at Anugrah Narayan Magadh Medical
College and Hospital, Gaya.
6. Learned counsel further submitted that the foundation
of the show cause notice was the receipts reflected in Form 26
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AS, on the basis whereof it was alleged that the petitioner had
received consideration towards execution of works contracts
without payment of Service Tax. According to the petitioner,
the respondent authorities committed a fundamental error in
treating the gross figures reflected in Form 26AS as the basis for
determining Service Tax liability.
7. Learned counsel further submitted that
respondent no.1 has erred in levying Service Tax on the gross
value of the works contract without following Rule 2A of the
Service Tax (Determination of Value) Rules, 2006 (Annexure:
P/10). Learned counsel submitted that Rule 2A specifically
provides the manner in which the service component of a works
contract is to be determined by excluding the value of property
in goods transferred during execution of the works contract. The
adjudicating authority, however, ignored the statutory
mechanism and proceeded to levy tax on the entire contract
value reflected in Form 26AS, which is impermissible in law.
It was also contended that the impugned order is
contrary to Article 366(29A)(b) of the Constitution of India.
Learned counsel submitted that the constitutional scheme
recognizes the transfer of property in goods involved in
execution of a works contract as a deemed sale liable to tax
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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Consequently, the material component of the works contract
could never have formed part of the taxable service for the
purposes of Service Tax. The respondent authorities, however,
have subjected the entire gross value of the contract to Service
Tax without excluding the value attributable to transfer of
property in goods, thereby travelling beyond the constitutional
limitations governing taxation of works contracts.
8. Learned counsel further submitted that
Notification No.30/2012-Service Tax dated 20.06.2012
(Annexure: P/11) specifically apportions the liability to pay
Service Tax between the service provider and the service
recipient in specified proportions. The respondent authorities,
however, ignored the said notification and fastened the entire tax
liability upon the petitioner alone. According to learned counsel,
the impugned order is, therefore, contrary not only to the
statutory notifications but also to the binding circulars issued by
the Central Board.
9. Specific averments to the aforesaid effect have
been pleaded by the petitioner in para-24, 25, 26, 27, 29 and
30 of the writ application, which are reproduced hereinbelow
for needful:
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
7/22“24. That the petitioner states that Service
Tax (Determination of Value) Rules, 2006
provide for the manner in which the service
portion in the execution of the works contract
is to determined. Rule 2A of the Rule provide
that value of service portion in the execution of
the works contract shall be equivalent to the
gross amount charged for the works contract is
reduced by the value of property in goods
transferred in the execution of the said works
contract. Rule 2A (iii) of the Rule inter-alia
provide that where the value has not been
determined under clause (i), the person liable
to pay tax on the service portion involved in
the execution of the works contract shall
determine the service tax in respect of works
contract entered into execution works contract
at the rate of 40% of the total amount charged
for the works contract. In cases of
maintenance and repair service tax is to be
paid only on 70% of the total amount charged
for the works contract.
25. That the Notification No. 30/2012
Service Tax also provide that service tax is to
be paid in equal proportions by the person
providing service and the person receiving the
service.
26. That the petitioner states that in terms of
the Service Tax (Determination of Value) Rules
Service Tax is to be paid only on the 40% of
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Needless to say, that this rule confirms to
Article 366 (29 (ab) of the Constitution of
India by allowing necessary direction on
account of transfer of property in goods in the
execution of the works contract. The
Notification No. 30/2012 dated 20.06.2012 fix
the liability both on the service provider and
the recipient of taxable service in equivalent
proportions.
27. That the petitioner submits that the
respondent no.1 in passing the order brought
to tax the gross value of the works contract to
tax in his hands only. The petitioner submits
that the respondent no.1 was rather obliged to
levy service tax only on the value of transfer of
property in goods in the execution of the works
contract not only in accordance with the
Determination of Value Rules but also in
accordance with Article 366 (29) (ab) of the
Constitution of India. Further the respondent
no.1 was also under an obligation to demand
only 50% of the service tax payable by the
petitioner in accordance with the notification
issued by the Government of India. The
petitioner submits that the respondent no.1 in
passing the order did not allow the deduction
statutorily required to be deducted and levied
tax equivalent 100% of the gross amount of
service tax paid contrary to the notification.
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The petitioner submits that the notification
having been issued by the Government of India
was binding on the respondent no.1 The
petitioner submits that therefore, on both the
counts the order of the respondent no.1 is
illegal and without jurisdiction.
29. That the petitioner may at this stage
state that the contract executed constitute use
of material and also labour. The petitioner
states that the use of material fall under the
description of transfer of property in goods
and is liable to Tax under the VAT Act and its
only the labour forming part of a Service
component is liable to Tax under the Service
Tax Act. The petitioner submits that in any
view of the matter the gross value of the
contract cannot form part of Service
particularly in view of the fact that no Service
Tax can be levied on transfer of property in
goods in the execution of works contract and
that the same only subject to levy of Tax under
the State Legislation namely, the VAT Act.
30. That the petitioner states that Article 366
(29Ab) of the Constitution of India in clear
term provide that “Tax on the sale or purchase
of goods” includes a Tax on the transfer of
property in goods (whether as goods or in
some other form) involved in the execution of
works contract. The petitioner submits that in
view of the contemplation is made in Article
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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366 (29Ab) of the Constitution of India it is
now possible for the State to dissect the
transaction between the sale of material and
supply of labour. The petitioner submits that in
view of the definition of sale in this Article and
also the VAT. Act the material being
transferred during the execution of the works
contract is liable to Tax only under the Value
Added Tax. The petitioner submits that
therefore, the respondent no. 1 is in error in
bringing to Tax the gross value of the contract
the levy of Service Tax is wholly illegal and
without jurisdiction. The same on this ground
alone, merit to be set aside and quashed.”
10. On the aforesaid grounds, learned senior
counsel submitted that the order dated 04.01.2024 is wholly
unsustainable in law and deserves to be quashed.
SUBMISSIONS ON BEHALF OF RESPONDENTS:
11. Per Contra, learned counsel appearing for the
respondents raised a preliminary objection regarding the
maintainability of the writ petition. It was submitted that against
the adjudication order dated 04.01.2024, an efficacious statutory
remedy of appeal was available under Section 86 of the Finance
Act, 1994 before the Customs, Excise and Service Tax Appellate
Tribunal (CESTAT). Without availing the said statutory remedy,
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the petitioner had directly invoked the extraordinary jurisdiction
of this Court under Article 226 of the Constitution of India.
Learned counsel submitted that where an effective statutory
remedy exists, the writ jurisdiction ought not to be invoked
except in exceptional circumstances. It was accordingly
submitted that the writ petition is not maintainable and is liable
to be dismissed on the ground of availability of an alternative
statutory remedy.
12. Learned counsel appearing for the respondents
also defended the impugned order dated 04.01.2024, on merit,
by contending that it had been passed after due consideration of
the written submissions, arguments, payment certificates and
other documents produced by the petitioner and was/is fully in
consonance with the provisions of Finance Act, 1994; Service
Tax (Determination of Value) Rules, 2006; Notification
No.30/2012-service tax dated 20.06.2012 and all other
applicable notifications and circulars.
Responding to the averments contained in para-24, 25,
26, 27, 29 and 30 of the writ application, the respondents in par-
14 and 15 of the counter affidavit replied as follows:-
“14. That in the light of the submissions
made under Paragraph Nos.
24,26,27,29,30,31 and 37 of the Writ
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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dated 04.01.2024 has been passed after due
consideration of written submission of the
petitioner and supporting documents i.e.,
agreements/payment receipts etc., and in
accordance with the provisions and
restrictions/limitations of the notifications.
The order is completely in consonance with
the provisions of the Finance Act, 1994 and
Rules /Notifications/Circulars made there
under. All the applicable provisions of
Act/Rules/Notifications/Circulars have been
adhered and Findings”.
15. That in the view of the submissions made
under Paragraph No.25 of the Writ Petition,
it is humbly stated that the Notification
no.30/2012-Service Tax which is related to
abatement under Reverse Charge
Mechanism (RCM) is applicable subject to
the condition that the service provider must
be either proprietorship firm or partnership
firm. In the instant case, the petitioner is a
private limited company and hence, reverse
charge mechanism vide Notification
no.30/2012-Service Tax is not applicable for
the services rendered by the petitioner.”
13. Learned senior counsel for the petitioner by way of
rejoinder, clarified that the description of the petitioner as a
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“Private Company Limited” in the cause title and the
accompanying affidavit was an inadvertent mistake. It was
pointed out that para-3 of the writ petition correctly describes
the petitioner as a partnership firm. According to the petitioner,
once such an error is corrected, the petitioner would also be
entitled to the benefit of Notification No.30/2012-Service Tax
dated 20.06.2012 relating to reverse charge mechanism.
FINDINGs:
14. Having heard learned counsels appearing on
behalf of the parties at length and upon perusal of the pleadings,
the Order-in-Original dated 04.01.2024, the statutory
notifications relied upon by the parties, and the materials
brought on record, this Court proceeds to examine the
controversy.
15. At the outset, the preliminary objection raised
by the respondents regarding availability of an alternative
remedy under Section 86 of the Finance Act, 1994 deserves
consideration. It is true that ordinarily this Court, in exercise of
jurisdiction under Article 226 of the Constitution of India,
would be slow in entertaining a writ petition where a statutory
appellate remedy is available. However, the rule regarding
alternative remedy is a rule of self-imposed restraint and not one
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of jurisdiction. Where the challenge goes to the very manner in
which the adjudicating authority has exercised jurisdiction,
where relevant statutory provisions and binding notifications are
alleged to have been ignored, or where the order ex facie suffers
from non-consideration of material issues having a direct
bearing on tax liability, the existence of an alternative remedy
would not operate as an absolute bar.
16. In the present case, the petitioner does not
merely dispute the quantification of demand. The challenge
proceeds on the foundation that while determining the liability,
the adjudicating authority failed to properly examine the
valuation mechanism applicable to works contracts, the effect of
Notification No. 30/2012-ST, and the constitutional limitation
flowing from Article 366(29A)(b) of the Constitution as
explained by the Constitution Bench judgments of the Hon’ble
Supreme Court. The controversy, therefore, is not confined to a
mere arithmetical determination of tax but concerns the very
basis upon which the liability has been assessed. This Court is,
therefore, of the opinion that the writ petition cannot be rejected
solely on the ground of availability of an alternative remedy.
17. This Court further finds substance in the
grievance of the petitioner that the adjudicating authority has
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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not adequately addressed the issue relating to the valuation of
works contracts. It is well settled that after the constitutional
amendment embodied in Article 366(29A), a works contract is a
composite contract involving both transfer of property in goods
and rendition of services. The petitioner specifically contended
that service tax could be levied only upon the service element of
the contract and not upon the gross contract value. It further
relied upon Rule 2A of the Service Tax (Determination of Value)
Rules, 2006 and the applicable abatements and valuation
provisions. None of these contentions, as averred in the writ
application have been denied or disputed in the counter affidavit
by the Respondents. For immediate reference, Rule 2A is
reproduced hereinbelow for needful:-
“2A. Determination of value of service
portion in the execution of a works
contract.-
Subject to the provisions of section 67, the
value of service portion in the execution of
a works contract, referred to in clause (h)
of section 66E of the Act, shall be
determined in the following manner,
namely:-
(1) Value of service portion in the
execution of a works contract shall be
equivalent to the gross amount charged for
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
16/22the works contract less the value of
property in goods transferred in the
execution of the said works contract.
Explanation.- For the purposes of this
clause,-
(a) gross amount charged for the works
contract shall not include value added tax
or sales tax, as the case may be, paid or
payable, if any, on transfer of property in
goods involved in the executive of the said
works contract;
(b) value of works contract service shall
include, –
(i) labour charges for execution of the
works;
(ii) amount paid to a sub-contractor for
labour and services;
(iii) charges for planning, designing and
architect’s fees;
(iv) charges for obtaining on hire or
otherwise, machinery and tools used for
the execution of the works contract;
(v) cost of consumables such as water,
electricity, fuel used in the execution of the
works contract;
(vi) cost of establishment of the contractor
relatable to supply of labour and services;
(vii) other similar expenses relatable to
supply of labour and services; and
(viii) profit earned by the service provider
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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relatable to supply of labour and services;
(c) Where value added tax or sales tax has
been paid or payable on the actual value
of property in goods transferred in the
execution of the works contract, then, such
value adopted for the purposes of payment
of value added tax or sales tax, shall be
taken as the value of property in goods
transferred in the execution of the said
works contract for determination of the
value of service portion in the execution of
works contract under this clause.
(ii) Where the value has not been
determined under clause (1), the person
liable to pay tax on the service portion
involved in the execution of the works
contract shall determine the service tax
payable in the following manner, namely:-
(A) in case of works contracts entered into
for execution of original works, service tax
shall be payable on forty per cent of the
total amount charged for the works
contract;
(B) in case of works contract entered into
for maintenance or repair or
reconditioning or restoration or servicing
of any goods, service tax shall be payable
on seventy percent of the total amount
charged for the works contract;
(C) in case of other works contracts, not
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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including maintenance, repair, completion
and finishing services such as glazing,
plastering, floor and wall tiling,
installation of electrical fittings of an
immovable property, service tax shall be
payable on sixty per cent. of the total
amount charged for the works contract;
Explanation 1. For the purposes of this
rule,-
(a) “original works” means-
(i) all new constructions;
(ii) all types of additions and alterations to
abandoned or damaged structures on land
that are required to make them workable;
(iii) erection, commissioning or
installation of plant, machinery or
equipment or structures, whether pre-
fabricated or otherwise;
(d) “total amount” means the sum total of
the gross amount charged for the works
contract and the fair market value of all
goods and services supplied in or in
relation to the execution of the works
contract, whether or not supplied under
the same contract or any other contract,
after deducting-
(i) the amount charged for such goods or
services, if any; and
(ii) the value added tax or sales tax, if any,
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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levied thereon:
Provided that the fair market value of
goods and services so supplied may be
determined in accordance with the
generally accepted accounting principles.
Explanation 2.–For the removal of doubts,
it is clarified that the provider of taxable
service shall not take CENVAT credit of
duties or cess paid on any inputs, used in
or in relation to the said works contract,
under the provisions of CENVAT Credit
Rules, 2004.”
The impugned order also does not disclose any
meaningful discussion regarding the applicability of the
valuation rules, the determination of the service component, or
the impact of the constitutional principles governing taxation of
works contracts. A quasi-judicial authority exercising
adjudicatory powers is under an obligation to deal with every
substantial contention having a bearing upon the tax liability.
Mere reference to the submissions of a party is not sufficient;
there must be an adjudication thereof supported by reasons. The
impugned order, in the opinion of this Court, falls short of this
requirement.
18. Equally significant is the petitioner’s contention
regarding Notification No. 30/2012-ST and the reverse charge
Patna High Court CWJC No.5828 of 2024(20) dt.29-07-2026
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mechanism. The respondents have sought to repel the contention
by asserting that the petitioner is a private limited company and
therefore ineligible to claim the benefit of the notification. The
petitioner, however, has specifically asserted that it is a
partnership firm and that the description of its status as a private
limited company in the cause title was an inadvertent error for
which an interlocutory application for correction had been filed.
Once such a dispute was raised and the very applicability of the
notification depended upon the legal status of the assessee, the
adjudicating authority was required to ascertain the factual
position and render a clear finding thereon. The impugned order
does not indicate that such an enquiry was undertaken. The
determination of liability without first deciding a foundational
issue affecting the applicability of the notification cannot be
sustained.
19. The Court also finds merit in the submission
advanced on behalf of the petitioner that the adjudicating
authority failed to adequately address the statutory notifications
and circulars specifically relied upon by the assessee in its
written submissions. A quasi-judicial order must demonstrate
application of mind. The reasons recorded must be such as
would indicate that the authority has considered the rival
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submissions and has arrived at its conclusions through a process
of reasoning. The requirement of recording reasons is not an
empty formality; it is a fundamental facet of fair adjudication.
The impugned order, despite running into several pages, does
not satisfactorily address the core legal issues raised by the
petitioner.
20. This Court is, however, conscious that it is not
sitting in appeal over the assessment order and therefore, the
issues raised by the petitioner, as discussed hereinabove, are
matters which should ordinarily be examined by the statutory
authority in the first instance. For that very reason, this Court
does not propose to adjudicate the petitioner’s tax liability on
merits. Hence, the matter deserves to be remitted for a fresh
consideration.
21. Accordingly, this Court is of the considered
view that the Order-in-Original dated 04.01.2024 cannot be
sustained in law. For the reasons recorded hereinabove, the writ
petition is allowed.
22. The Order-in-Original dated 04.01.2024
(Annexure-P/4) passed by the Principal Commissioner, CGST &
Central Excise, Patna-I is hereby quashed and set aside. The
matter is remanded to the concerned adjudicating authority for
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fresh consideration. The adjudicating authority shall afford
adequate opportunity of hearing to the petitioner and shall
thereafter pass a fresh reasoned order in accordance with law.
23. The fresh order shall be passed expeditiously,
preferably within a period of four months from the date of
receipt/production of a copy of this judgment. There shall be no
recovery from the petitioner pursuant to the impugned order
dated 04.01.2024 until a fresh order is passed in terms of the
present judgment.
24. The writ petition stands allowed in the aforesaid
terms. No order as to costs.
(Rajeev Ranjan Prasad, J)
(Alok Kumar Sinha, J)
HR/-
U
