Facts of the Case

The Appellant (Department) filed an appeal under Section 35G of the Central Excise Act, 1944 challenging the CESTAT order which had set aside the Order-in-Original imposing Service Tax liability of ₹4.97 crores on the Respondent.

The Respondent, M/s JMD Limited, had undertaken development projects in Ludhiana and Gurugram. A Show Cause Notice alleged that the services rendered constituted “commercial or industrial construction services” and were taxable accordingly.

However, the Respondent contended that the agreements were composite in nature involving transfer of goods and services and thus qualified as “works contract services.”

Issues Involved

  1. Whether the services rendered by the Respondent are taxable as “commercial or industrial construction services” or as “works contract services”.
  2. Whether an appeal involving determination of taxability is maintainable before the High Court under Section 35G.
  3. Whether such disputes fall within the jurisdiction of the Supreme Court under Section 35L. 

Petitioner’s (Department’s) Arguments

  • The services rendered by the Respondent fall under “commercial or industrial construction service” as defined under Section 65(25b) of the Finance Act, 1994.
  • The demand of Service Tax raised through the Show Cause Notice and confirmed in Order-in-Original was valid.
  • The CESTAT erred in setting aside the tax demand.

Respondent’s Arguments

  • The agreements entered into were composite contracts involving both goods and services.
  • The services should be classified as “works contract services” and not as construction services.
  • Reliance was placed on the Supreme Court judgment in Commissioner of Central Excise vs Larsen & Toubro Ltd. (2015) holding that composite contracts are taxable as works contracts.
  • The appeal before the High Court was not maintainable as it involved determination of taxability. 

Court’s Findings / Order

  • The Delhi High Court held that the core issue involved determination of taxability of services, which falls within the scope of Section 35L.
  • It reiterated that appeals relating to taxability, valuation, or rate of duty must be filed before the Supreme Court and not the High Court.
  • The Court relied on several precedents including:
    • Commissioner of Service Tax vs Ernst & Young Pvt. Ltd.
    • Commissioner of Service Tax vs Delhi Gymkhana Club Ltd.
    • Commissioner of Service Tax vs Bharti Airtel Ltd.
  • The appeal was dismissed as not maintainable, with liberty granted to approach the Supreme Court under Section 35L.

Important Clarifications by the Court

  • Maintainability depends on the nature of the order passed by CESTAT, not on the grounds raised in appeal.
  • Even if only limitation or procedural issues are raised, if the order involves taxability/valuation, appeal lies only before the Supreme Court.
  • The Appellant can seek benefit of Section 14 of the Limitation Act, 1963 for time spent before the wrong forum.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS18122024CEAC42024_210740.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.