Facts of the Case

The Revenue filed an appeal before the Delhi High Court challenging the order dated 03.07.2023 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in favour of M/s Sidh Designers Private Limited. The dispute related to commission paid by the respondent to overseas agents situated in Dubai in connection with export of readymade garments.

The Department sought to levy service tax on the said commission amounts under the category of Business Auxiliary Service as defined under Section 65(19) of the Finance Act, 1994. Earlier, the matter had travelled to the Supreme Court, which by order dated 26.07.2019 remanded the case to the Tribunal for fresh consideration on merits, uninfluenced by earlier High Court observations rendered in refund proceedings.

Issues Involved

Whether an appeal against a CESTAT order involving determination of taxability of commission paid to overseas agents is maintainable before the High Court under Section 35G of the Central Excise Act, 1944, or whether the statutory remedy lies directly before the Supreme Court under Section 35L of the Act.

Petitioner’s Arguments

The Revenue contended that the appeal before the High Court was confined to the issue of limitation, as the CESTAT had decided the matter on limitation grounds after remand by the Supreme Court. It was argued that since taxability was not finally adjudicated, the appeal was maintainable before the High Court.

Respondent’s Arguments

The respondent raised a preliminary objection on maintainability, submitting that the core issue involved determination of taxability of commission paid to overseas agents, which squarely falls within the scope of Section 35L of the Central Excise Act. It was argued that once the nature of the order relates to taxability, the appeal would lie only before the Supreme Court, irrespective of the grounds raised.

Court Order / Findings

The Delhi High Court examined Sections 35G and 35L of the Central Excise Act, 1944 and reiterated that maintainability depends on the nature of the order passed by CESTAT, and not on the issues urged by the appellant. The Court held that the issue whether commission paid to overseas agents is taxable under Business Auxiliary Service is a root issue of taxability, which directly relates to rate of duty and assessment.

Relying on binding precedents including Navin Chemicals, Bharti Airtel Ltd., Delhi Gymkhana Club, Ernst & Young Pvt. Ltd., SpiceJet Ltd., and Intertoll ICS, the Court held that even if the Tribunal has decided the appeal on limitation, where the underlying dispute concerns taxability, the appeal lies only before the Supreme Court under Section 35L.

Important Clarification

The High Court clarified that Revenue authorities are not left without remedy and are free to pursue statutory remedies before the Supreme Court under Section 35L. The period during which the appeal remained pending before the High Court would be liable to be excluded while computing limitation under Section 14 of the Limitation Act, 1963.

Final Outcome

The appeal filed by the Commissioner of CGST, Delhi South against M/s Sidh Designers Private Limited was dismissed as not maintainable. The Revenue was granted liberty to avail appropriate remedies before the Supreme Court under Section 35L of the Central Excise Act, 1944, with benefit of exclusion of time spent before the High Court for limitation purposes. All pending applications were disposed of accordingly.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/75404092025SERTA52024_175605.pdf


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