Facts of the Case

The Commissioner of Service Tax/CGST (Appellants) challenged the Customs, Excise and Service Tax Appellate Tribunal’s (CESTAT) order which had dealt with the question whether amounts paid by Indian exporters to overseas companies (in Dubai) and shown as “commission” in shipping documents should be treated as taxable “business auxiliary services” under Section 65(19) of the Finance Act, 1994. The respondents were exporters of readymade garments who made such payments in the course of exports. 

Issues Involved

  1. **Whether payments made to overseas entities labelled as “commission” are taxable under “business auxiliary services” as defined under Section 65(19) of the Finance Act, 1994.
  2. Whether the High Court has jurisdiction to entertain these appeals or if they directly lie before the Supreme Court under Sections 35G/35L of the Central Excise Act, 1944 (applicable to Service Tax as well). 

Petitioner’s (Revenue) Arguments

• The payments to overseas entities constitute a “business auxiliary service” under Section 65(19) and are, therefore, taxable.
• The Appellate Tribunal was incorrect in its interpretation that these services were not taxable and the remand from the Supreme Court directed reconsideration.

Respondent’s Arguments

• The primary objection was that the High Court lacks jurisdiction because issues of taxability would confer exclusive appellate jurisdiction on the Supreme Court under Sections 35G/35L of the Central Excise Act, 1944. 

Court’s Findings / Order

Maintainability

The Court analysed Sections 35G and 35L of the Central Excise Act, 1944, which govern appellate jurisdiction in service tax matters:
The Court held that whenever the question involves taxability or valuation issues, the appeal would ordinarily lie to the Supreme Court and not to the High Court, even if styled as an appeal under Section 35G. This follows prior coordinate bench decisions (e.g., Commissioner of Service Tax v. Ernst & Young Pvt. Ltd., and others) which clarify that appeals involving determination of taxability/valuation lie directly to the Supreme Court.

Substantial Legal Holding: The Court recognised that mere framing of an appeal under Section 35G does not confer jurisdiction if the impugned order involves taxability questions; it must be filed to the Supreme Court under Section 35L instead.

Remand & Direction

Given the jurisdictional issue and the Supreme Court’s earlier remand (in Commissioner of Service Tax v. M/s Sidhi Designers Pvt. Ltd. & Ors., Civil Appeal Nos. 5869–5874 of 2019), the High Court permitted the appellants/Submissions to avail statutory remedies in accordance with law (i.e., by approaching the Supreme Court).

Important Clarifications

An appeal under Section 35G of the Central Excise Act will not lie before the High Court if the order involves a question relating to the rate of duty, taxability, valuation or classification, which must be appealed directly to the Supreme Court under Section 35L.

The appellate jurisdiction is defined by the nature of the order, not merely the issues raised by the appellant.

Earlier remand by the Supreme Court remains binding and directs reconsideration on merits without being influenced by prior observations.

Sections Involved

  • Finance Act, 1994 – Section 65(19) (definition of “business auxiliary service”)
  • Central Excise Act, 1944 – Sections 35G & 35L (appellate jurisdiction; appeal to High Court vs Supreme Court)

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/75404092025SERTA52024_175605.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.