Appeal Related to Service Taxability Must Be Filed Before the Supreme Court u/s 35 of CEA: Delhi HC Ruling Explained
In a recent and significant judgment, the Delhi High Court has clarified that if the dispute pertains to the taxability of a service, the appeal must be filed before the Supreme Court, not the High Court. The ruling refers to Section 35L of the Central Excise Act, 1944, which governs appellate jurisdiction in indirect tax matters including service tax.
This blog simplifies the ruling, outlines the legal basis, and explains what it means for taxpayers and consultants involved in service tax disputes, especially in the GST transition era.
What Was the Case About?
The matter arose in M/s Gopal Zarda Udyog (P.) Ltd. v. CESTAT, where the taxpayer challenged a CESTAT (Customs, Excise and Service Tax Appellate Tribunal) order related to whether the service was taxable under the Finance Act, 1994.
The assessee approached the Delhi High Court under Section 35G of the Central Excise Act, which allows appeal to the High Court on substantial questions of law—except where the case involves taxability or valuation of goods/services.
Key Legal Provision: Section 35L of Central Excise Act
Section 35L (as applicable to service tax via Section 83 of the Finance Act, 1994) states that any order of the Tribunal involving the determination of service tax liability or valuation shall be appealed directly before the Supreme Court.
In simpler terms:
- If it’s about taxability/valuation → Go to Supreme Court
- If it’s about procedural or legal interpretation → Go to High Court
Delhi High Court’s Decision
The High Court dismissed the appeal stating:
“Since the issue relates to the taxability of the service itself, the appropriate forum for appeal under Section 35L is the Supreme Court, not this Court under Section 35G.”
This aligns with previous rulings including:
- VKC Footsteps India Pvt Ltd v. Union of India (SC)
- CCE v. Kerala State Beverages Corporation Ltd. (SC)
Why This Ruling Matters
- Prevents Forum Shopping: Taxpayers can’t pick and choose between SC and HC.
- Streamlines Jurisdiction: Makes it clear which forum has the authority in service tax matters.
- Useful in GST-era Litigation: Since many service tax disputes are still pending post-GST, knowing the right forum is crucial.
Expert Insight: What Taxpayers Should Do
According to tax practitioners, filing an appeal in the wrong forum leads to unnecessary delay and cost. Always assess:
- Is the dispute about whether a service is taxable or not? → Supreme Court
- Is it about limitation, penalty, or procedural lapses? → High Court
Tip: Get your appeal vetted by a legal/tax expert before filing, especially for legacy service tax matters still under litigation.
Comparison Table: SC vs HC Jurisdiction in Service Tax Appeals
| Issue Type | Appeal Forum | Legal Provision |
|---|---|---|
| Taxability or Valuation | Supreme Court | Section 35L, CEA |
| Other substantial legal questions | High Court | Section 35G, CEA |
| Procedural/technical issues | High Court | Section 35G, CEA |
| GST-specific issues (post-2017) | As per CGST Act | Section 117/118, CGST |
FAQs
Q1. Does this apply to GST also?
No. GST appeals are governed by Section 117/118 of the CGST Act, but similar logic applies: valuation/taxability issues go to SC.
Q2. What happens if I file in the wrong forum?
The case may be dismissed as non-maintainable, and you’ll have to re-file in the correct forum, wasting time and legal costs.
Q3. Is service tax still relevant post-GST?
Yes. Pre-GST service tax disputes are still being litigated, especially regarding show-cause notices, refunds, and assessments.
Summary
Delhi HC held that service tax appeals involving taxability must be filed in the Supreme Court under Section 35L of the Central Excise Act. High Courts have no jurisdiction in such cases, especially when the dispute revolves around whether the service is taxable.
Final Thoughts
This ruling by the Delhi High Court is a strong reminder that jurisdiction matters—especially in older service tax cases still under litigation. If your appeal involves taxability, head straight to the Supreme Court under Section 35L. Don’t risk a dismissal.
Need help drafting or reviewing your service tax appeal? Contact Efiletax today for expert legal and compliance support.