Service Tax: HC Cites Lack of Jurisdiction in Taxability Cases, Directs Revenue to Approach SC

The Commissioner of Service Tax filed an appeal before the High Court under Section 35G of the Central Excise Act, 1944, against a CESTAT order dated 31.07.2024. The CESTAT had set aside a service tax demand of s. 3.13 crore raised against a company for providing broadband services to STPIs, embassies, and similar exempt organizations. The Tribunal allowed the assessee’s appeal solely on the ground that the Show Cause Notice dated 19.10.2011 was time-barred under Section 73(1) of the Finance Act, 1994, as there was no allegation of suppression or willful misstatement.

In response, the Respondent filed an application seeking recall of the High Court’s order issuing notice, arguing that the dispute, though decided on limitation, originated from a taxability proceeding. Therefore, the appropriate appellate forum was the Supreme Court under Section 35L, not the High Court under Section 35G.

Issue Raised: Is an appeal on limitation grounds arising from a taxability dispute under Service Tax maintainable before the High Court under Section 35G and is the proper forum the Supreme Court under Section 35L?

HC’s Decision: The High Court accepted the Respondent’s objection and dismissed the Revenue’s appeal as not maintainable. It held that when the underlying adjudication involves a question of taxability, even if the CESTAT‘s order rests solely on limitation, the jurisdiction to hear the appeal vests with the Supreme Court under Section 35L. The Court emphasized that the determining factor is the nature of the original adjudication, not merely the ground on which the Tribunal allowed relief.

Relying on precedents such as Ernst & Young Pvt. Ltd., Bharti Airtel Ltd., and SpiceJet Ltd., the Court reaffirmed that taxability-linked disputes are bypassed by the High Court‘s jurisdiction under Section 35G. However, it clarified that the dismissal of the present appeal does not bar the Revenue from approaching the Supreme Court, and the Department may seek exclusion of time under Section 14 of the Limitation Act if it so chooses.