CESTAT Taxability Appeals Lie Before Supreme Court U/S 35L Of Central Excise Act: Telangana High Court

The Telangana High Court has held that an appeal against a Customs, Excise and Service Tax Appellate Tribunal (CESTAT) order involving the taxability or classification of a service lies before the Supreme Court under Section 35L of the Central Excise Act, and not before the High Court under Section 35G.

A Division Bench comprising Justices P. Sam Koshy and Narsing Rao Nandikonda dismissed an appeal filed by the Principal Commissioner of Central Tax & Customs against Mars International India Pvt. Ltd. The Revenue had challenged a CESTAT order that set aside the service tax demand and penalty imposed on the company. The Court said:

“Moreover, the most recent judgment in the case of Alupro Building Systems (1st cited supra) itself clarifies this aspect. In view of the same, we are of the considered opinion that the instant appeal under Section 35G of the Central Excise Act would not be maintainable. Rather, the appellants would have to prefer the appeal, if at all if they intend to, invoking the provisions of Section 35L of the Central Excise Act before the Hon'ble Supreme Court.”

The dispute arose after CESTAT, Hyderabad allowed Mars International India's appeal and set aside the demand raised by the Department along with the penalty. The Tribunal had held that the services provided by the company were not taxable under Section 65(65) of the Finance Act.

Before the High Court, Mars International India raised a preliminary objection that the Revenue's appeal under Section 35G of the Central Excise Act was not maintainable. It argued that the questions raised by the Revenue essentially concerned the classification and taxability of the services.

The Bench accepted the objection. It noted that even the questions of law framed by the Revenue concerned the taxability and classification of secondment arrangements, showing that classification was at the heart of the dispute.

It relied on the Supreme Court's recent decision in Alupro Building Systems Pvt. Ltd. v. Commissioner of Central Excise, Bangalore-II. It noted that disputes concerning taxability or excisability are treated as questions relating to the "rate of duty" and therefore fall within the appellate jurisdiction of the Supreme Court.

The Bench also distinguished the Supreme Court's decision in Commissioner of Central Excise, Hyderabad v. Shriram Refrigeration Industries, relied upon by the Revenue. It observed that the dispute in that case arose in a different factual context and therefore did not assist the Revenue in the present matter.

Accordingly, the High Court held that the Revenue's appeal under Section 35G was not maintainable and that any challenge to the CESTAT order on the issue of taxability or classification would have to be filed before the Supreme Court under Section 35L of the Central Excise Act.

Appearances: D. Pallavi, Senior Standing Counsel for CBIC, for the appellant; Karthik Ramana Puttam Reddy for the respondent.