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 Yogmaya Traders Private Limited. The dispute related to the payment of commission by the respondent to overseas agents located in Dubai in connection with export of readymade garments.

The Department sought to levy service tax on such commission amounts under the category of Business Auxiliary Service as defined under Section 65(19) of the Finance Act, 1994. The Tribunal decided the appeal primarily on the issue of limitation after remand by the Supreme Court in earlier proceedings.

Issues Involved

Whether an appeal against a CESTAT order involving determination of taxability of services is maintainable before the High Court under Section 35G of the Central Excise Act, 1944, or whether the 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 and therefore maintainable under Section 35G. It was argued that since the Tribunal had not finally adjudicated taxability, the High Court could entertain the appeal.

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 Section 35L of the Central Excise Act. It was contended that whenever the nature of the order relates to taxability, the appeal lies only before the Supreme Court.

Court Order / Findings

The Delhi High Court examined Sections 35G and 35L of the Central Excise Act, 1944 and reiterated that the nature of the order passed by CESTAT, and not the grounds raised in appeal, determines maintainability. The Court held that determination of taxability of services is a root issue 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., and SpiceJet Ltd., the Court held that even where the Tribunal has decided the matter on limitation, if the underlying order involves taxability, the appeal would lie only before the Supreme Court.

Important Clarification

The High Court clarified that Revenue authorities are not remediless and are free to pursue statutory remedies before the Supreme Court under Section 35L. The pendency of the appeals before the High Court would also be excluded for limitation purposes under Section 14 of the Limitation Act, 1963.

Final Outcome

The appeal filed by the Commissioner of CGST, Delhi South against M/s Yogmaya Traders 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. The period during which the appeal remained pending before the High Court was directed to be excluded for the purpose of limitation. All connected applications were disposed of accordingly.

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


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