GST UPDATE

Question before Hon’ble Authority:

Whether the pen drives recovered from the Assessee, together with the printouts signed by its Assistant Manager, could be relied upon to establish the alleged unaccounted cash receipts from customers.
Whether the statements of the Assistant Manager (Accounts) and the Director could be treated as reliable evidence when the retraction was made after a considerable delay.
Whether the Department was required to produce additional evidence despite the existence of electronic records and statements of persons who had knowledge of the transactions.

Hon’ble Court:	CESTAT, New Delhi
Case Title	Principal Commissioner of Central Excise, Customs, Goods and Service Tax, Delhi East vs AGC Reality Private Limited v.
Appeal No. & Citation	Service Tax Appeal No. 51492 of 2019
Date of Order	23 October 2026
Outcome	Appeal allowed in favour of the Revenue

Brief Facts of the Case

M/s. AGC Reality Private Limited, the Respondent, was searched by the officers of The Directorate General of Central Excise Intelligence (DGCEI) based on the intelligence received that the Respondent-Assessee was collecting a portion of the consideration from customers in cash against the booking of residential flats. It was alleged that these cash receipts were not recorded in the statutory books of accounts and that service tax was not paid on such amounts. During the search, six pen drives were recovered from one of the employee who was the Assistant Manager (Accounts) and was responsible for accounting and administrative work. The data retrieved from the pen drives contained Excel sheets and other electronic files showing details of flat bookings, customer names, flat numbers and amounts allegedly received in cash. Amount of Rs. 25,00,000 was also deposited towards its anticipated service tax liability by the Assessee. Based on this exercise, the Department issued a Show Cause Notice and a subsequent Statement of Demand, seeking recovery of service tax on the alleged suppressed consideration and unaccounted cash receipts along with applicable interest and penlaty. The Additional Commissioner confirmed the demands and appropriated the amount already deposited by the Assessee.Aggrieved by the adjudication order, the Assessee preferred an appeal before the Commissioner (Appeals). The Commissioner (Appeals) set aside the adjudication order, holding that the allegations were not adequately supported by independent corroborative evidence. The Department thereafter challenged the appellate order before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi.

Brief Arguments by Department - Appellant

Alleged Collection of Unaccounted Cash from Customers

The Department contended that the search conducted by DGCEI resulted in the recovery of documents, electronic gadgets and six pen drives. Scruitny of these records found that the assessee was collecting a part of the payment in cash from customers against the sale of residential flats and the said cash receipts were not accounted for in the statutory records, and service tax was not paid on such unaccounted receipts, indicating an intention to evade payment of service tax.

Commissioner Appeals failed to appreciate the overwhelming evidence

The Revenue contended that the Commissioner (Appeals) while dropping the demand failed to appreciate the evidence available on record, including the recovery of pen drives containing details of unaccounted cash receipts. Further, the Accounts Manger admitted the acceptance of unaccounted cash. This was also approved by Director of the company. The Department submitted that the statements were never retracted and, therefore, were voluntary and not obtained under duress or coercion.

Voluntary Deposit Towards Service Tax Liability

It was further submitted that the Assessee had voluntarily deposited an amount towards the partial discharge of its service tax liability which itself implies an admission of the liability.

Reliance placed on Judicial Precedents

It was further submitted that the Commissioner (Appeals) had ignored the judicial principles laid down by the Hon’ble Gujarat High Court in Tulip Lamkraft Pvt. Ltd. v. Commissioner of Central Excise, reported as 2015 (316) ELT 417 (Guj.). It was held therein that where there is overwhelming evidence in the form of unretracted and unequivocal confessional statements supported by entries in records such as diaries or pen drives, the absence of additional evidence, such as excess electricity consumption or the source of raw materials, would not, by itself, vitiate the order. The Department contended that this principle applied to the present case, where the Commissioner (Appeals) had disregarded the admissions of the employee and the Director, along with the records containing details of the cash transactions.

Failure to Appreciate Prima Facie Case

The Department further argued that the Commissioner (Appeals) erred in insisting upon additional corroborative evidence, such as bank details, balance sheets and statements of flat buyers, despite the admissions made by the employee and the Director and the existence of separate records of the unaccounted transactions.
Important Case Laws Relied Upon

Case Law	Citation
Surjeet Singh Chhabra v. Union of India	1997 (89) ELT 646 (SC)
Romesh Chandra Mehta v. State of West Bengal	1999 (110) ELT 324 (SC)
Naresh J. Sukhawani v. Union of India	1996 (83) ELT 258 (SC)
Commissioner of Central Excise, Madras v. Systems & Components	2004 (165) ELT 136 (SC)
Union of India v. Dharmendra Textiles	2008 (231) ELT 3 (SC)

Brief Arguments by Respondent Taxpayer

Demand Based on Assumptions and Extrapolation

The Assessee submitted that the Department had adopted an arbitrary extrapolation methodology to compute the alleged differential value and raise an additional service tax demand. It had undertaken an exercise of analysing approximately 1,601 flat transactions and segregated them into three categories, namely, down payment plan, flexi payment plan and construction-linked payment plan. Based on this analysis, the Department identified the price range within which the maximum number of flats were sold in a particular year and treated the lower end of such price range as the “correct” value for all transactions falling within that category. The difference between this assumed value and the declared transaction value was treated as suppressed consideration. Such a demand, based on assumed values rather than the actual consideration received in individual transactions, was unsustainable.

Absence of Evidence Supporting the Alleged Cash Receipts

The allegation of receipt of unaccounted cash was entirely unsubstantiated and unsupported by credible evidence. No cash was recovered during the search, no statements of buyers confirming payment of cash were recorded, and no money trail was established to link the alleged cash receipts with the Assessee. The entire allegation was based on electronic data and printouts that had neither been authenticated nor corroborated by independent evidence. On the other hand, the Assessee had produced supporting evidence, including affidavits signed by buyers denying cash payments and builder-buyer agreements reflecting the details of discounts offered to them. Accordingly, the Commissioner (Appeals) had rightly dropped the demand.

Pen Drive Data and Loose Sheets Constituted Uncorroborated Material

Department had relied upon certain loose sheets and pen drive data and had arbitrarily interpreted the figures contained therein. In the absence of corroborative evidence, such documents were in the nature of “dumb documents” and could not be relied upon to determine the tax liability. The demand was purely based on assumptions, presumptions and extrapolation could not be sustained.

Price Variation in the Real Estate Sector Does Not Establish Undervaluation

It was further submitted that price variation was inherent in the real estate sector and could not, by itself, be equated with suppression of value. The sale price of flats could vary from customer to customer depending upon the applicable discounts and commercial terms. Such variation did not establish that undervaluation or suppression of taxable value.

Identical Allegations Were Decided in favour in Income Tax Proceedings

The Respondent submitted that identical allegations regarding the alleged receipt of unaccounted cash had been examined in proceedings under the Income Tax Act for the relevant assessment years. The Hon’ble Delhi High Court had also dismissed the appeal filed by the Revenue, holding that the additions were based solely on the DGCEI report and that the material relied upon was not incriminating in nature.

Invocation of the Extended Period of Limitation Was Unjustified

The Department had invoked the extended period of without establishing suppression of facts or any intent to evade payment of service tax. It was contended that the transactions were duly recorded in the books of account and disclosed in the returns filed by the-Assessee. In the absence of the necessary ingredients for invoking the extended period, the demand could not be sustained on this ground.

S. No.	Case Laws	Citation
1	Mekala Raja Plywoods Pvt. Ltd. v. Commissioner of Central Excise, Vapi	2014 (308) ELT 90 (Tri.-Ahmd.)
2	Commissioner of Central Excise v. Omkar Textile Mills Pvt. Ltd.	2010 (259) ELT 687 (Guj.)
3	Super Forgins & Steel Ltd. v. Commissioner of Central Excise, Kolkata-IV	(2024) 17 Centax 34 (Tri.-Cal.), dated 09.01.2024
4	ALPS Container Pvt. Ltd. v. Commissioner of Central Excise, Mumbai-V	2018 (364) ELT 103 (Tri.-Mumbai)
5	Commissioner of Central Excise & Customs v. Swati Polyester	2015 (321) ELT 423 (Guj.)
6	J.P. Iscon Pvt. Ltd. v. Commissioner of Central Excise, Ahmedabad-I	2022 (63) GSTL 64 (Tri.-Ahmd.)
7	Bhandari Caterers v. Principal Commissioner of Customs, Central Excise & Service Tax, Indore	2019 (29) GSTL 489 (Tri.-Del.)
8	Agrawal Builders and Colonizers v. Commissioner of Central Goods, Service Tax, Central Excise and Customs, Bhopal	2025 (5) TMI 1831 – CESTAT, New Delhi
9	Commissioner of CGST & Central Excise, Jaipur-I v. M/s. Lotus Cons Build Technorate Pvt. Ltd.	2025 (1) TMI 788 – CESTAT, New Delhi
10	Neptune Infrastructure Pvt. Ltd. v. Department of Income Tax	Decision dated 19.10.2011

Findings and Judgement

Evidentiary Value of the Pen Drive Data and Supporting Documents

The Tribunal observed that the pen drives contained several Excel sheets and files, the contents of which were explained by the Assistant Manger in his statement. Printouts of the files were also taken and signed by him. Upon scrutiny of the retrieved data, it was found that the Assessee had allegedly collected cash from various customers towards the basic cost of residential flats, which was not reflected in its books of account.

Delayed Retraction of Statements Was an Afterthought

The Tribunal placed considerable reliance on the statements of Assistant Manger and the Director of the Assessee which explained the contents of the pen drives in his initial statement. The Tribunal disagreed with the finding of the Commissioner (Appeals) that the statements had been retracted. It observed that the initial statement of the Manager had been recorded well before the issuance of the Show Cause Notice, and he had subsequently reaffirmed the same. The Director had also confirmed the contents of his statement. The Tribunal held that the alleged retraction made in the reply to the Show Cause Notice, filed after the subsequent statement, could not be considered a timely retraction. In the Tribunal’s view, the retraction was a delayed afterthought, and the Commissioner (Appeals) had erred in accepting it as a valid basis for disregarding the earlier statements.

Burden of Explaining Facts Within Exclusive Knowledge of the Assessee

The Tribunal referred to Section 106 of the Indian Evidence Act, which provides that the burden of proving a fact especially within the knowledge of a person rests upon that person. It observed that the pen drives had been recovered from the Assessee and that Assistant Manger who maintained the accounts, had exclusive knowledge of their contents. The Tribunal further observed that the absence of entries relating to cash receipts in the books of account or bank statements could not, by itself, discredit the Department’s case, as the allegation was that the cash transactions were deliberately kept outside the regular books and separate records were maintained flat-wise in the pen drives.

Statements Recorded Under Section 14 of the Central Excise Act

The Tribunal examined Section 14 of the Central Excise Act, 1944 and held that a statement recorded under Section 14 could be relied upon in departmental proceedings, provided it was voluntary and truthful. If either of these requirements was absent, the statement would have to be discarded or its reliability otherwise established. In the present case, the Tribunal found that the statements of the Assistant Manager were retracted after eleven months. The Director had also confirmed its contents. In these circumstances, the Tribunal did not accept the allegation that the statements had been obtained under coercion.

Reliance on Judicial Precedents Concerning Retraction of Statements

The Tribunal relied upon the principles discussed by the Hon’ble Supreme Court in Vinod Solanki v. Union of India, reported as 2009 (233) ELT 157 (SC), held that the evidences brought on record by way of confession which stood retracted, if substantially corroborated by other independent and cogent evidences, the relevance thereupon can be placed.
It also referred to K I PAVUNNY VS. Assistant Collector (HQ) Central Excise Collectorate, Cochin reported 1997 (3) SCC 721, in which it was held that the it is the duty of the court to look into the facts and circumstances of each case to find whether the confession was voluntary. If the court is satisfied that the confession was voluntary and true, it can form the basis of conviction.
Applying these principles, the Tribunal held that the retraction in the present case was delayed and appeared to be a strategic afterthought.

Printouts of the Pen Drives Provided Documentary Support to the Allegations

The Tribunal further observed that the Department had also relied upon printouts extracted from the pen drives recovered from Assistant Manager. These printouts had been retrieved in his presence at the office of the Assessee and were signed by him. The Tribunal held that these documents sufficiently supported the allegations contained in the Show Cause Notice and therefore the Commissioner (Appeals)’s conclusion that there was no other evidence supporting the alleged cash receipts was wrong.
Accordingly, the Tribunal set aside the impugned Order-in-Appeal and allowed the Department’s appeal.

CA Pradeep Jain_

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GST update /2026-27/0108

GST UPDATE

Question before Hon’ble Authority:

Brief Facts of the Case

Brief Arguments by Department - Appellant

Brief Arguments by Respondent Taxpayer

Findings and Judgement

Opinion

Author’s Comment

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