Whether appeal is maintainable in High Court if the issue is related to “levy of tax”?

PJ/CASE LAW/2015-16/3014

Case: COMMISSIONER OF SERVICE TAX Vs GECAS SERVICES INDIA PVT. LTD.

Citation: 2015 (39) S.T.R. 980 (Del.)

Brief Facts: The appeal is filed against the impugned final order passed by the Customs, Excise Service Tax Appellate Tribunal (‘CESTAT’) in Sales Tax Appeal No. 781 of 2012.The question that arose for consideration in the assessment proceedings involving the Respondent Assessee was whether the export of services provided by the Respondent constituted a ‘service’ and was chargeable to Service tax under Section 73(1) read with Section 66 and 68 of the Finance Act, 1994 read with Rules 6 of the Service Tax Rules 1994?

In the impugned order, the CESTAT has followed the decision of its Larger Bench in GAP International Sourcing (India) Pvt. Ltd. v. Commissioner of Service Tax, Delhi, 2015 (37)S.T.R.757 (Tri.-Del.) and decided the question in the negative and in favour of the Assessee. The appeal by the Commissioner of Service Tax against the said decision being CEAC No. 99 of 2014 was dismissed by this Court by order dated 18thNovember 2014 on the ground of maintainability.

A preliminary objection has been raised by the Respondent as regards the maintainability of the present appeal before this Court. Reliance is placed on the decision of this Court in Commissioner of Service Tax v. Ernst & Young Private Limited, 2014 (34)S.T.R. 3 (Del) (hereafter Ernst & Young )

Reasoning of Judgement: Section 83 of the Finance Act 1994, makes the provisions of Sections 35G and 35L of the CE Act ipso facto applicable in relation to Service tax. Section 35G concerns appeals to the High Court from orders of the CESTAT whereas Section 35L deals with appeals to the Supreme Court from orders of the CESTAT.
Section 35L(b) provides that appeals from orders of CESTAT would lie directly to the Supreme Court where it involves the “the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment.” In Ernst & Young this Court held that any question having relation to a rate of duty would include a determination as levy of tax on a particular service. It was held that “The words ‘rate of tax’ in relation to rate of tax would include the question whether or not the activity is chargeable to tax under a particular or specific provision.” Accordingly, it was held that an appeal under Section 35-G of the CE Act against the order of the CESTAT on the question of chargeability of a service to tax was not maintainable before this Court. The Special Leave Petition (SLP) filed by the Appellant herein against the decision in Ernst & Young, being SLP [(CC) No. 21099] of 2014 (Commissioner of Service Tax v. Ernst and Young Pvt. Ltd.) (along with other similar petitions) was dismissed as withdrawn by the Supreme Court by its order dated 19th January 2015.

Following the decision in Ernst & Young, sub-section (2) was inserted in Section 35(L) of the CE Act by the Finance (No. 2) Act, 2014 to clarify that “the determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment.” A Circular was also issued on 10th July 2014 by the Tax Research Unit, Department of Revenue, Ministry of Finance, Government of India, New Delhi clarifying the position.
Therefore, the appeal is dismissed as not maintainable in this Court.

Decision: Appeal Dismissed

Comment The issue in the assessment proceedings was related to chargeability of service. The Tribunal had decided the case in favour of assessee (respondent). Department has filed this appeal before High Court. Respondent (assessee) has submitted that the appeal is not maintainable before this court in view of decision given in the case of Commissioner of Service Tax v. Ernst & Young Private Limited.

Section 35L(b) of Central Excise Act, provides that appeals from orders of CESTAT would lie directly to the Supreme Court where it involves the “the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. In Ernst & Young this Court held that any question having relation to a rate of duty would include a determination as levy of tax on a particular service.

Therefore High Court has dismissed the appeal as the appeal is related to “levy of tax” which should be filed directly to Supreme Court.

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PJ/CASE LAW/2015-16/3014

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