Annual Customs, Excise and Service Tax Case Digest: CESTAT Rulings 2025 (Part 6)

The two member bench of Binu Tamta (Judicial) and P.V. Subba Rao (Technical) observed that the activity of arranging transportation of goods till the dealer's premises cannot be classified under “Business Auxiliary Service” and, therefore, no service tax is payable on transportation related expenses recovered in excess by the assessee from their buyers.

Sandhya Marines Limited,appellant-assessee,exported prawns and shrimps between 1998-1999 and 2004-2005. The department treated them as fish and imposed a 0.5% cess under the Agricultural Produce Cess Act, 1940. Exporters challenged this before the Andhra Pradesh High Court, which ruled in their favor, holding that prawns and shrimps were not fish and cess was not applicable.

The bench noted that the assessee had filed refund claims for cess paid between 1998 and 2005. The Deputy Commissioner of Customs (Refunds) initially rejected the claims, citing time-bar and lack of original shipping bills. However, the Commissioner (Appeals) later overturned this rejection in 2006 and remanded the matter. The tribunal upheld the ruling, affirming that cess was not applicable.

Mukesh Associates,appellant-assessee,received a Show Cause Notice on 18.04.2007, proposing ₹1,38,95,688 in tax, penalties, and interest. The Commissioner confirmed the demands in an Order-in-Original on 12.12.2007. The assessee appealed to the tribunal, which, on 17.04.2008, set aside the demands and the order, asking the Commissioner to issue a new decision.

The appellate tribunal ruled that the scope of the appeal could not go beyond the appellant's grievance. Since the Revenue did not appeal, they could not misuse the remand order. It found that the Original Authority had misinterpreted the remand order, so it set aside the impugned order to the extent of the relief granted in the 22.12.2008 order.

The CESTAT noted that the assessee did not cooperate by submitting required details. It therefore set aside the impugned order and directed the Adjudicating Authority to pass a de-novo order limited to the normal period. The assessee was instructed to cooperate and provide the necessary documents. The tribunal ordered the de-novo decision to be made within 45 days.

The bench observed that the goods in question are capital goods and are not mere spare parts, and thus the assessee is eligible to claim for full utilization of SHIS Scrip.

Thus, the CESTAT referred to the judgement in Commissioner of Customs (Port), Kolkata vs. M/s. Cosmic Ferro Alloys Limited, in which the tribunal had held that items such as "Roller Sets," "Blades for Slitting Machines," and "Spares for Cold Rolling Mills" qualify as capital goods under the SHIS Scheme.

A single member bench comprising Somesh Arora(Judicial Member) reviewed the issue of double taxation under two tax regimes, which had been addressed in a previous case. The appellant, involved in civil construction, had paid service tax on advances before GST was introduced and later reversed the prepaid tax, filing a refund claim. The tribunal found that double taxation could be avoided, as the Finance Act, 1994 required advance tax payments for long-term contracts, which the assessee followed.

Tenneco Automotive India Pvt Ltd,appellant-assessee, paid duty and interest during the audit after the audit team identified certain dues. The issue was whether a penalty was still applicable.

A single member bench comprising Somesh Arora (Judicial Member) agreed with the assessee's counsel that no penalty was required if duty and interest were paid during the audit. It noted that an audit was part of the assessment process, not an enforcement action.

A single member bench comprising C L Mahar(Technical Member) found that the Commissioner (Appeals) wrongly confirmed the service tax demand by misinterpreting Section 66F of the Finance Act, 1994. The tribunal held that the agreement in question was primarily for job work manufacturing, where fixed charges were an integral part of the job work cost. It ruled that the fixed charges were paid to maintain confidentiality and compensate for idle plant and machinery during lean periods, not for a separate declared service under Section 66E(e).

CESTAT Remands Case Over Incorrect Service Classification under VCES for Fresh AdjudicationN J Patel Associates vsCommissioner of C.E. & S.T.-Vadodara-I 2025 TAXSCAN (CESTAT) 362

A single member bench comprising C L Mahar(Technical Member) found that the AA failed to consider the assessee's work invoices or clearly determine whether the service fell under "Works Contract Service" or "Construction Service." It noted that the Authority categorized it as "Commercial Construction Service" but did not grant the abatement benefit under Notification No. 13/2012-ST dated June 28, 2012.

Koch Chemicals Technology Group India Pvt Ltd,appellant-assessee,disputed the department's classification of after-sales services and goods promotion for Koch Membrane Inc., USA, as intermediary services under a 2011 agreement. For the period from July 2012 to September 2014, the department issued a show cause notice on September 27, 2016, for non-payment of Rs. 39,16,972 in service tax, along with interest and penalty.

A single member bench comprising Somesh Arora(Judicial Member) reviewed the submissions and upheld the Commissioner (Appeals) findings. It noted that under the Place of Provision of Service Rules, 2012, intermediary services were determined by the location of the service provider, not the recipient. Since the assessee provided services in India for Koch Membrane Inc., USA, they were not treated as export services and were liable for service tax.

In conclusion, CESTAT directed the refund of Rs. 8,36,196 to Tata Steel BSL Limited and set aside the order by the Commissioner (Appeals), which had denied the refund, and held that the rejection contravened the transitional provisions under Section 142 of the Central Goods and Services Tax (CGST) Act, 2017.

The bench, after going through the contentions raised by both parties and the submissions made thereafter, reached a strong conclusion that the impugned order was inadequate and the inadequacies prevented the bench from deciding whether the tax liability was in fact legal and proper.

The Tribunal agreed with the finding of the Commissioner (Appeals) in the impugned order that there was no evidence of intention to evade payment of duty and suppression of facts because it was possible for the assessee to have entertained the belief that the Student Almanac and teacher planner were not exigible to duty and, therefore, to have NOT declared them in their excise returns.

Amkap Marketing Pvt. Ltd.,appellant-assessee, filed a refund claim for ₹50 lakh deposited as a pre-deposit on February 2, 2012, following the Tribunal's direction. After the Final Order dated December 27, 2018, the amount became refundable. The Original Authority approved the refund but denied interest. The Commissioner (Appeals) later dismissed the assessee's appeal against the denial of interest.

The appellate tribunal ruled that the assessee was entitled to a refund with interest under the pre-amended provisions of the Act. It clarified that deposits made before the 2014 amendment were governed by the earlier Sections 35F and 35FF. The refund had to be processed according to these provisions, with interest starting three months after the appellate order, in line with Section 11BB of the Act.

The bench referenced the Maithan Ceramics Ltd. case, confirming that interest applied from three months after the order, not from the deposit date. It found that the refund was made within three months of the order or the claim being filed, so no interest was due.

Kalyan Jewellers India Pvt. Ltd., the appellant, is engaged in the manufacture and sale of gold, diamond, and silver jewellery. The case arose out of an Order-in-Original dated June 23, 2023, passed by the Commissioner of Central Tax and Excise, Kochi, confirming a substantial central excise duty demand along with interest and penalties.

The two-member bench comprising P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member) observed that the classification under CETH 7113 was correct as there was no evidence that the goods were studded with diamonds or other precious stones.

The tribunal also accepted the appellant’s claim that CENVAT credit was reversed wherever required and that export documentation was sufficient. The impugned order was set aside, and the appeal was allowed with consequential relief to the appellant.

The tribunal, comprising Shri P. Dinesha (Judicial Member) and Shri M. Ajit Kumar (Technical Member), examined the legal validity of appeals filed against the orders passed by the Commissioner (Appeals) under Section 128A of the Customs Act, 1962.

The tribunal noted that when an individual's luggage/bag, arriving from a domestic flight within India, is intercepted by officers at Chennai’s domestic airport, it cannot be presumed that such baggage falls under the purview of the Customs Act, 1962, nor can the Baggage Rules, 2016 be automatically applied to it.

While the appeal involving Noorul Ayin was returned to be filed before the appropriate appellate forum on the basis of jurisdictional issues, the other three defect appeals have been slated for further hearing, provided no additional defects are noted.

The two member bench composed of D.M.Mishra(Judicial Member) and Pullela Nageswara Rao(Technical Member) considered both sides and the records. The main issue was whether a notice under Section 28(1) of the Customs Act could be issued for short levy after the Bill of Entry was assessed.

It found this issue was settled by the Madras High Court in Venus Enterprises. The Court ruled that a show-cause notice for short-levered duty could be issued even after goods were cleared, as Section 28(1) allows for recovery in such cases. The Court also stated that accepting the appellant's argument would make the provision in Section 28(1) redundant.

The Bench relied on several judgments, including Western Coal Fields Ltd. v. CCE, Nagpur(2003) and ONGC v. CCE, Vadodara (1995), wherein it was held that penalties cannot be imposed on PSUs in the absence of wilful suppression or deliberate evasion. In those cases, the Tribunals observed that being government-owned entities, PSUs are unlikely to engage in fraudulent conduct or suppression of facts to avoid duty.

The Tribunal also took note of the findings in the Toyota Kirloskar Motors Pvt. Ltd. case, upheld by the Supreme Court, which held that outdoor catering services primarily for personal use are not eligible for credit. However, it drew a distinction for business events, recognizing that catering at exhibitions and launches supports sales promotion and business activity.

The Bench, comprising S. S. Garg, Member (Judicial) and P. Anjani Kumar, Member (Technical), dismissed the Revenue’s appeal and partly allowed Maruti Suzuki’s appeals by remanding the matter for quantification of actual liability. All penalties were set aside, though applicable interest was directed to be paid.

It was further held that the term “erroneous refund” cannot be loosely applied to justify recovery unless the original refund order is established as legally flawed through statutory processes. The Tribunal emphasized that procedural lapses, such as non-submission of original FIRCs or minor discrepancies in documentation, do not justify denial of substantive benefit, especially when the refund was granted following due verification.

The Tribunal referred to several decisions including Topcem India v. Union of India and RNB Carbides & Ferro Alloys Pvt. Ltd., and also relied on the judgment of the Delhi High Court in BT (India) Private Limited, reinforcing that quasi-judicial refund orders cannot be revisited or set aside through collateral proceedings. The Bench also stated that the alleged absence of nexus between input and output services should be determined in the course of credit eligibility proceedings, not during refund grant.

According to the two-member bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member), imported consumer goods are freely accessible within the nation and cannot be assumed to be illegally imported or smuggled if they are discovered on the person or in the luggage of people arriving at domestic airports while the flight is operating domestically.

Thus, the CESTAT stated that "under the Baggage Rules 2016, 'baggage' includes jewelry worn or concealed on the person of an individual arriving in India from abroad, and thus this Tribunal lacks jurisdiction to entertain an appeal pertaining to 'any goods imported or exported as baggage' as per the exclusions carved out by the proviso to Section 129A(1) of the Customs Act, 1962."

CESTAT Rules Food Sales at PVR Cinemas Counters Not Taxable as Services, Except in Gold Class CategoryM/s. PVR Limited vs PrincipalCommissioner of Goods & Service Tax & Central Excise 2025 TAXSCAN (CESTAT) 376

The tribunal held that such services attract service tax, but regular counters serving pre-packaged or reheated food for takeaway within the cinema premises do not involve any service element and are not open to the general public but only to ticket-holders, thereby classifying the activity as the sale of goods. The tribunal allowed the appeal.

Appearing for the appellant, Prabhat Kumar, argued that the legal position regarding such supplies being treated as exports has already been settled by High Courts. He relied on the decisions of the Karnataka High Court in Commissioner of Central Excise, Bangalore-III v. Lotus Power Gears Pvt. Ltd. (2017) and the Kerala High Court in FCI OEN Connectors Ltd. v. CCE & ST, Ernakulam (2019), which had held that supplies to SEZ developers are to be treated as exports and hence do not attract the reversal requirement under Rule 6.

After hearing both sides, the Tribunal observed that there was no stay on the cited High Court rulings and found merit in the appellant’s arguments. It held that the law, as interpreted by the Kerala and Karnataka High Courts, should be followed and allowed the appeal with consequential relief to the appellant.

The tribunal accepted the appellant's argument that Ethylbenzene is a Xylene isomer, sharing the same molecular formula (C₈H₁₀). Including it, the isomer content exceeded 95%, meeting the HSN criteria for CTH 29024400. Hence, the original classification was upheld.

The two member bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that nothing has been brought on record to indicate any mens rea on the part of the appellants as the applicable duty as well as interest have been paid before issuance of the show cause notice. It has been held in a number of cases under identical circumstances, that penalty cannot be imposed.

The tribunal noted that being a Public Sector Undertaking wholly owned by the Government of India, they could not have evaded the duty and therefore a harsh penalty cannot be imposed.

The two-member bench comprising Dr. D.M. Misra (Judicial Member) and Pullela Nageswara Rao (Technical Member) found that the refund application had been thoroughly verified by the Range Superintendent, including the change of address.

The tribunal observed that the appellant had indeed informed the department about the change of address well in advance and that there was no dispute regarding the eligibility or fulfillment of the conditions under the refund notification. The tribunal ruled that the rejection of the refund on such a minor procedural ground was unwarranted. The tribunal set aside the order of the Commissioner (Appeals) and granted the refund to the appellant with consequential relief as per law.

The two-member bench comprising Dr. D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member) examined the ATS agreement and found that the nature of updates and upgrades provided did not support the claim of sale or transfer of goods. The bench rejected the appellant’s claim for abatement under Notification No. 12/2003-ST, finding no evidence of a separate value for goods as required under the notification.

The appeal was partially allowed. The service tax demand was upheld for the normal period, while extended period liability and penalties were set aside.

The two-member bench comprising P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member) observed that in Sara Spices’ earlier case, it was categorically held that the process of crushing chillies does not qualify as manufacture, and that ruling had attained finality.

The tribunal ruled that clearances of such spice powders could not be included in the turnover for the purpose of SSI exemption under Notification No. 8/2003-CE. The tribunal allowed the appeals and extended consequential relief to the appellant under the law.

The two-member bench comprising Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) observed that the tribunal had already adjudicated the same issue in the appellant’s favor. The tribunal ruled that the services of taxi operators were input services for the appellant’s tour operations, and the invoices clearly showed that the taxi operators had paid service tax.

The two-member bench comprising P.A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) relied on the Supreme Court’s interpretation in Bharati Airtel Ltd., where it was held that when the definition of “input” is tied to the provision of output service, it should not be interpreted restrictively.

The Apex Court had clarified that telecom towers and prefabricated buildings, being movable and essential for the delivery of telecom services, meet the definition of inputs under Rule 2(k) of the CENVAT Credit Rules. The Tribunal held that BSNL was entitled to avail the CENVAT credit on the said items. The appeal was allowed with consequential relief as per law.

The bench comprising Binu Tamta, Member (Judicial), and Hemambika R. Priya, Member (Technical), accepted ONGC’s arguments and observed that the issue had already been adjudicated by multiple benches of the Tribunal, including the Principal Bench in the case of South Eastern Coalfields Ltd. The Tribunal reiterated that liquidated damages, penalties, and forfeited amounts are not consideration for any service and hence do not constitute a taxable activity under Section 66E(e).

After hearing both sides, the Tribunal held that the impugned order of the Commissioner (Appeals) was based on a correct interpretation of Notification No. 41/2012-ST and the binding precedent of the Tribunal in Nahar Industrial Enterprises Ltd. The Tribunal noted that Section 68(2) explicitly casts the liability on the service recipient for certain services like GTA, and Clause 3(b) of the notification specifically denies refund to such persons.

Microsoft Corporation Private Limited, based in Gurugram, had filed eight refund claims for the period April 2010 to March 2012 on account of unutilized CENVAT credit arising from export of services under the category of “Business Auxiliary Service.” The refund was sanctioned on April 29, 2016. However, since the refund was granted after the statutory period of three months from the date of filing, the appellant filed a separate claim for interest on July 8, 2016. This claim was rejected by both the original authority and the Commissioner (Appeals), citing delays on the part of the appellant in submitting required documents.

After considering the submissions, the Bench comprising S. S. Garg, Member (Judicial), and P. Anjani Kumar, Member (Technical), ruled in favor of the appellant. The Tribunal found no evidence from the Revenue to substantiate its claim that the delay was due to non-cooperation by the appellant. It also noted the Department’s failure to act in accordance with CBEC Circular No. 828/05/2006-CE and held that the delay was entirely on the part of the Department.

The two-member bench comprising Judicial Member S. S. Garg and Technical Member P. Anjani Kumar observed that the agreement clearly established an independent contractor relationship between Airbnb India and Airbnb Ireland, with no agency or tripartite relationship. The tribunal explained that the mere fact of following client guidelines or subcontracting work did not change the nature of the service into that of an intermediary.

The appellant, engaged in the manufacture and sale of cement, was issued a show cause notice dated 2 June 2016, proposing to disallow and recover Cenvat Credit availed between February 2013 and March 2016. The matter pertained specifically to service tax paid on Goods Transport Agency (GTA) services availed for delivering goods to buyers' premises. The adjudicating authority, in an earlier round, had dropped the demand for Rs.3.09 crore, confirming only the balance amount of Rs.3,44,228 on the ground that the sales from depots to buyers were not proven to be on FOR (Free on Road) destination basis.

The Tribunal, while upholding the adjudication on merits, accepted the appellant’s contention regarding limitation. It noted that the show cause notice did not allege fraud, suppression or willful misstatement and that the extended period was invoked without substantive justification. The Tribunal observed that the dispute pertained to interpretational issues on the definition of ‘place of removal’, and that such ambiguity, coupled with departmental circulars and judicial decisions, negated the justification for extended limitation.

The appellant, UltraTech Cement Ltd., operates a marketing office for its east zone in Kolkata and was registered under the service tax law as a service recipient liable to pay tax under the reverse charge mechanism. The demand was raised following a departmental audit that pointed to differences between the freight expenses booked in the company’s books and the actual tax paid as per ST-3 returns. The department treated the discrepancy as under-reporting and accordingly issued a show cause notice, followed by the impugned order confirming the demand with interest and penalty under Section 78 of the Finance Act, 1994.

The bench comprising Ashok Jindal, Member (Judicial) and K. Anpazhakan, Member (Technical), concluded that the demand was not sustainable as it was raised without analyzing the nature of transactions and without rebutting the CA certificates. The tribunal also held that the associated interest and penalty could not be sustained since the primary demand itself was not legally tenable.

CBRE South Asia Pvt. Ltd., a provider of Real Estate Agent and Consulting Engineer services, had appealed against multiple orders issued by the Commissioner of Service Tax, Delhi-IV, and other authorities. The disputes centered on wrongful availment of CENVAT credit on Rent-a-Cab services, exemption claims for services provided to SEZ units, and credits on Professional Indemnity Insurance. The tribunal examined these issues across four separate appeals covering financial years from 2010-11 to 2017-18.

On the Professional Indemnity Insurance issue, the tribunal ruled in favor of CBRE, allowing the CENVAT credit. It relied on earlier decisions, including the tribunal’s own order in CBRE’s case, which held that such insurance is integral to the provision of consultancy services and qualifies as an input service.

CESTAT Bench composed of S S Garg (Judicial Member) and P Anjani Kumar (Technical Member) dismissed the Revenue’s invocation of the extended period of limitation, noting no evidence of intent to evade taxes. It confirmed demands for other periods, including Rs. 1,91,82,534 for 2013-14 to 2014-15, Rs. 1,41,12,379 for 2015-16, and Rs. 2,64,44,500 for 2016-17 and 2017-18 (up to June 2017). However, all penalties across the appeals were set aside.

The Tribunal noted that the self-credit refunds in question were duly ratified by the jurisdictional Deputy or Assistant Commissioner after verification, as mandated under the notification. Since these refund orders were never reviewed or appealed under Section 35E, the Tribunal held that the show cause notice under Section 11A lacked legal backing. It emphasised that when refunds are sanctioned through speaking orders, they attain finality unless overturned through proper legal remedies.

It was further observed that the department had not issued any communication under Para 2C(e) of the Notification, which mandates that assessees be informed of any excess credit before initiating recovery. Bypassing this procedural requirement and proceeding directly with Section 11A action, according to CESTAT, was impermissible.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chandigarh has ruled that compressing hydrogen gas into cylinders does not amount to 'manufacture' under central excise laws, quashing a Rs. 50.59 lakh duty demand on Royal Tarush Gases. The bench held that the activity merely involved repackaging an already marketable product for industrial consumers, which falls outside the definition of manufacturing under Chapter 28 of the Central Excise Tariff Act.

The tribunal rejected this argument, relying on Supreme Court and CESTAT precedents including Surya Air Products and Goyal M G Gases Pvt. Ltd. It noted that Chapter Note 9 of Chapter 28 (covering hydrogen gas) lacks the specific provision found in Chapter 27 (for natural gas) that explicitly treats compression as manufacture. The bench observed that industrial buyers like vanaspati manufacturers don't qualify as 'consumers' under tariff rules, and the gas remained marketable in its original form.

Supplies Amid Imports and IGST over Inter-State Trade & Supplies have similar Tax Rate: CESTATM/s JLC Electromet PrivateLimited vs Commissioner, Customs 2025 TAXSCAN (CESTAT) 397

Using 13 Advance Authorizations, JLC Electromet Private Limited, the appellant/assessee, imported and cleared items without paying the integrated goods and services tax or the basic customs charge. Following an investigation, the Directorate General of Revenue Intelligence4 concluded that although the appellant had properly claimed exemption from BCD, it had falsely claimed exemption from IGST because the scheme's exemption from IGST was contingent on "actual user" conditions, which the appellant had, without question, not met.

In exercising its authority under Article 246 read with entry 83 of List I (Union List) of the Seventh Schedule to the Constitution, the two-member bench of Justice Mr. Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has noted that additional customs duties are imposed on import or export transactions under the Customs Tariff Act, 1975. In order to execute the authority granted by Article 269 of the Constitution, IGST is imposed on the supply during imports under Section 3 of the Customs Tariff Act, 1975 read with Section 5 of the IGST Act.

Kaipan Pan Masala Pvt. Ltd., the appellant, is engaged in the manufacture of tobacco-based products. For the relevant period, the company classified its product as “Chewing Tobacco” under Tariff Entry 2403 9910, thereby availing the benefit of duty assessment based on the Maximum Retail Price (MRP) under Section 4A of the Central Excise Act, 1944.

The two-member bench comprising Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) observed that the classification of the product as JST had already been settled by the Supreme Court, which is binding on all courts and tribunals.

The tribunal upheld the imposition of interest, citing the compensatory nature of such levy, and also affirmed the penalty imposed under Rule 18 of the Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010, read with Section 11AC of the Central Excise Act and Rule 25 of the Central Excise Rules, 2002. The appeal was accordingly dismissed.

The tribunal held that mere collection of rent without payment of tax, in a legally unsettled context, did not constitute suppression of facts or deliberate evasion. The tribunal set aside the demand, interest, and penalty, holding that in the absence of willful suppression, the extended period of limitation could not be invoked.