CESTAT Mumbai Rules Procedural Compliance In Filing Grounds Of Appeal Is Mandatory, Grants Remand

On 12 May, the Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that filing proper grounds of appeal along with Form ST-4 under the Finance Act, 1994 is not a mere procedural requirement but a mandatory condition for meaningful adjudication.

A Bench comprising Judicial Member Ajay Sharma however also held that procedural lapses should not defeat substantive justice and remanded the matter to the Commissioner (Appeals) for fresh consideration on merits after permitting rectification. It observed:

“The filing of grounds of appeal is not a mere procedural formality, it serves the substantive purpose of apprising the appellate authority of the specific findings in the order under challenge that are assailed, the legal or factual grounds on which the challenge is founded, and the precise relief sought.”

The dispute arose from a service tax demand raised against Salini NDT Services Pvt. Ltd. on the basis of Income Tax Return data received from the Income Tax Department. The Department alleged short payment of service tax for the period 2016–17 to 2017–18 and issued a show cause notice invoking the extended period under Section 73(1) of the Finance Act, 1994.

It further alleged that the taxpayer failed to produce complete financial records, including Form 26AS and other supporting documents, and therefore proceeded on a best judgment basis to quantify the demand along with interest and penalties.

During adjudication, the taxpayer submitted reconciliation statements and challans showing partial payment of service tax. It also claimed exemption for services rendered to Special Economic Zone (SEZ) units under Notification No. 12/2013-ST dated 1 July 2013. However, the adjudicating authority held that no adequate documentary evidence had been furnished to substantiate the SEZ exemption claim.

The authority partly dropped the demand but confirmed a liability of Rs. 14.49 lakh along with applicable interest and penalties. The Commissioner (Appeals) subsequently dismissed the appeal, noting that no proper grounds of appeal had been filed in Form ST-4 and that several financial documents were also not produced.

Before the Tribunal, the taxpayer contended that all relevant documents supporting the SEZ exemption claim had been placed before the Commissioner (Appeals) but were not considered. The Revenue, on the other hand, argued that the appeal itself was defective as the mandatory statement of facts and grounds of appeal were missing from Form ST-4.

The Tribunal held that the appeal suffered from a serious procedural defect as the “Statement of Facts” and “Grounds of Appeal” were absent from the prescribed Form ST-4, and therefore the Commissioner (Appeals) was justified in recording that no grounds of appeal had been filed.

It reiterated that where a statute prescribes a specific procedure for exercising the right of appeal, such procedure must be strictly followed. Without clear pleadings and articulated grounds of challenge, the appellate authority cannot effectively examine the legality or correctness of the order under appeal.

At the same time, the Tribunal emphasised that where relevant material and exemption claims are available, the taxpayer must be given a fair opportunity to present its case on merits before the first appellate authority. However, it held that the matter warranted reconsideration in the interest of justice.

Accordingly, the CESTAT set aside the impugned order and remanded the case to the Commissioner (Appeals) with directions to permit the taxpayer to file complete pleadings and supporting documents, and thereafter pass a fresh speaking order after granting a hearing to both sides.

Appearance for the Appellants: Shri Ashwini Kumar, Advocate

Appearance for the Respondent: Shri Dhananjay Dahiwale (AR)