CESTAT Holds Paper Biri Not Classifiable as Cigarettes, Rejects Central Excise Duty Demand

Commissioner, CGST, Ghaziabad vs M/s Salasaar Exim

The Allahabad Bench of the CESTAT upheld the assessee’s classification of paper biri and dismissed the Revenue’s appeal. It found that Salasaar Exim manufactured paper biri manually without power, clearly labeled and marketed as “bidi,” and there was no evidence that the product was known as cigarettes in common trade parlance. The Tribunal noted that Chapter 24 imposes no restrictions on size, packing, or the use of cut tobacco in biris.

The Bench held that the Revenue failed to prove reclassification as cigarettes, as there was no market enquiry, no power-driven machinery, and the reliance on the CRCL report and assumptions could not override tariff provisions. Confirming classification under 24031929, the Tribunal set aside the duty demand and fully dismissed the Revenue’s appeal.

Expert Advice in R&D Projects Attracts Service Tax: CESTAT Classifies NGRI’s Deliverables as Scientific or Technical Consultancy

National Geophysical Research Institute vs CommissionerOf Central Tax Medchal GST

CITATION : 2025 TAXSCAN (CESTAT) 1270

The CESTAT Hyderabad held that certain externally funded research and survey activities conducted by the National Geophysical Research Institute (NGRI) qualified as “Scientific or Technical Consultancy” (STC)services and were liable to service tax for the period October 2001 to March 2005. Although NGRI argued that its work was limited to non-taxable “Survey and Map Making” services, the Tribunal found that in several projects—including those for the Nuclear Power Corporation of India and the Government of Andhra Pradesh—the institute provided expert interpretation, recommendations, and technical advice, thus falling under the taxable STC category under Section 65(92) of the Finance Act, 1994.

However, for projects that involved only data collection and mapping, such as assignments for NCAOR, the Tribunal classified them as non-taxable SMM services. On the limitation issue, it ruled that being a government body does not shield NGRI from the extended limitation period under Section 73 if suppression of facts is found, upholding part of the ₹1.22 crore service tax demand raised by the Department.

CESTAT Upholds ₹35.74 Lakh CENVAT Credit Demand for Wrong Availment of EPCG and Customs Cess Credits

Sampark Industries Ltd vs Commissioner, CGST, Ghaziabad

CITATION : 2025 TAXSCAN (CESTAT) 1272

The Allahabad Bench of the CESTAT upheld a demand of ₹35,74,487 against the assessee, confirming that CENVAT credit availed on Education Cess, Higher Education Cess, Special Additional Duty on imported capital goods, and CVD on EPCG imports was inadmissible under Rule 3(1) and Rule 4(2) of the CENVAT Credit Rules, 2004. The Tribunal noted that the credits were not eligible duties, export obligations under the EPCG scheme were unfulfilled, and the capital goods were destroyed in a fire, meaning they were neither in possession nor used in production.

The Tribunal also held that failure to disclose the irregular credits in ER-1 returns amounted to suppression, justifying invocation of the extended limitation period and imposition of penalty. Dismissing the appeal, the Tribunal affirmed recovery of the wrongly availed credit along with applicable interest and penalty.

Extended Period Not Invocable as All Activities Were Declared in ST-3 Returns: CESTAT Quashes Service Tax Demand

M/s SSG Infratech Pvt. Ltd. vs Commissioner of Central Excise& Service Tax, Noida

CITATION : 2025 TAXSCAN (CESTAT) 1274

The Allahabad Bench of the CESTAT quashed a service tax demand, holding that the extended period of limitation under Section 73(1) was wrongly invoked. The assessee had regularly filed ST-3 returns and maintained books of account reflecting all receipts for taxable activities, including construction of residential complexes, for 2009-10 to 2013-14. The Tribunal found no evidence of intent to evade, fraud, or suppression, as the alleged short payment was detected only during departmental audit.

The Bench emphasized that extended limitation applies only in cases of deliberate misstatement or suppression, which was not established. Since all relevant details were disclosed in statutory returns and audit records, the normal limitation period alone was applicable. The appeal was allowed, and the demand was set aside.

Extended Period Not Invokable: CESTAT Rules Constitutional Validity of 'Renting of Immovable Property' Levy is Still Pending Before SC

Rupinder Sagar Garg vs Commissioner of Central Excise andService Tax, Chandigarh-II

CITATION : 2025 TAXSCAN (CESTAT) 1276

The Chandigarh Bench of the CESTAT held that the extended period of limitation could not be invoked for service tax demands relating to Renting of Immovable Property, noting that the constitutional validity of the levy remains pending before the Supreme Court. In the case of Rupinder Sagar Garg, who earned rental income from a hospital tenant, the Revenue alleged suppression and confirmed service tax demand for the period after July 2010. The appellant argued that the issue involved complex legal uncertainty, given retrospective amendments, High Court stays, and ongoing Supreme Court proceedings.

Agreeing that the dispute was interpretational and that no intent to evade tax could be attributed, the Tribunal ruled that extended limitation was unjustified. Further, relying on precedent, the Bench held that once extended limitation is excluded, no demand survives even for the normal period. The order confirming the demand was set aside, and the appeal allowed solely on limitation grounds.

Education Cess Being Surcharge Cannot Be Charged Twice on Clearances to DTA: CESTAT sets aside Differential Duty Demand

M/s Sudhir Power Ltd vs Commissioner of Central Excise &Service Tax

CITATION : 2025 TAXSCAN (CESTAT) 1277

The Chandigarh Bench of the CESTAT ruled that Education Cess and Secondary & Higher Education Cess being surcharges cannot be levied twice on DTA clearances made by an Export Oriented Unit. In the case of Sudhir Power Ltd., the Revenue had proposed calculating the cess both before and after adding Special Additional Duty (SAD), resulting in a higher duty rate and demand of differential duty along with interest and penalty.

Relying on the Supreme Court-affirmed decision in Sarla Performance Fibers Ltd., the Tribunal held that once the cess is added to customs duty, the enhancement is complete and cannot be repeated. Finding the Department’s approach unsupported by Section 3(1) of the Central Excise Act, and the issue already settled by precedents, the Tribunal set aside the impugned order and allowed the appeal.

Interest Not Payable from 2008 Deposit: CESTAT Holds Sugar Manufacturer Not Entitled to Interest on Investigative Deposit

Commissioner, CGST & Central Excise, Gautam Budh Nagar vsM/s DSM Sugar

CITATION : 2025 TAXSCAN (CESTAT) 1278

The Allahabad Bench of the CESTAT allowed the Revenue’s appeal, overturning the Commissioner (Appeals)’s decision that had granted DSM Sugar interest from the 2008 date of reversal on a refund of ₹78,01,415. The Tribunal held that the amount reversed during investigation was not a statutory pre-deposit but a payment toward a potential duty liability, and therefore could not attract interest from the date of reversal.

It ruled that refund interest must strictly follow Sections 35FF and 11B of the Central Excise Act, meaning interest would apply only from the legally prescribed date and not for the period before the refund claim. Accordingly, DSM Sugar was denied interest on the amount retained by the department since 2008 beyond what the statute permits.

Interest Not Payable from 2008 Deposit: CESTAT Holds Sugar Manufacturer Not Entitled to Interest on Investigative Deposit

Commissioner, CGST & Central Excise, Gautam Budh Nagar vsM/s DSM Sugar

CITATION : 2025 TAXSCAN (CESTAT) 1278

The Allahabad Bench of the CESTAT allowed the Revenue’s appeal, overturning the Commissioner (Appeals)’s decision that had granted DSM Sugar interest from the 2008 date of reversal on a refund of ₹78,01,415. The Tribunal held that the amount reversed during investigation was not a statutory pre-deposit but a payment toward a potential duty liability, and therefore could not attract interest from the date of reversal.

It ruled that refund interest must strictly follow Sections 35FF and 11B of the Central Excise Act, meaning interest would apply only from the legally prescribed date and not for the period before the refund claim. Accordingly, DSM Sugar was denied interest on the amount retained by the department since 2008 beyond what the statute permits.

Commissioner's Report, Toll Barrier Receipts Shows Manufacturing Activity Verified: CESTAT Rejects Clandestine Removal Allegation

Om Sai Ram Industries vs Commissioner of Central Excise andService Tax

CITATION : 2025 TAXSCAN (CESTAT) 1281

The Chandigarh Bench of the CESTAT set aside the excise duty demand on Om Sai Ram Industries, ruling that allegations of non-manufacture based solely on a third-party investigation were unsustainable when the assessee had furnished positive evidence of genuine production and clearances. The Revenue had alleged that the unit availed area-based exemption fraudulently using invoices from non-existent suppliers, leading to a confirmed demand of ₹95.20 lakh with penalties.

The Tribunal observed that the Department failed to conduct any independent inquiry at the appellant’s premises and ignored key evidence including toll barrier receipts and verification reports by the Jurisdictional Commissioner confirming raw-material movement and functional machinery. Relying on precedent that clandestine removal cannot be presumed without concrete proof, the Bench held the demand to be without merit, and allowed the appeal.

Cost-Sharing Among Group Entities for Events Outside India Does Not Amount to Taxable Service: CESTAT

"M/s Boston Scientific India Pvt Ltd vs Commissioner ofCentral Excise, Goods & Service Tax, Gurugram"

CITATION : 2025 TAXSCAN (CESTAT) 1282

The Chandigarh Bench of the CESTAT ruled that sharing expenses with foreign group companies for overseas conferences and training does not amount to the provision of a service, and therefore cannot attract Service Tax. Boston Scientific India Pvt. Ltd. had reimbursed its associated enterprises on a cost-to-cost basis for events conducted outside India for the mutual benefit of group entities. The Revenue had treated these reimbursements as taxable under Business Support Services and confirmed a demand of ₹1.81 crore.

Relying on the Supreme Court ruling in Gujarat State Fertilizers & Chemicals Ltd., the Tribunal held that mere expense-sharing does not constitute a taxable service. It further noted that reimbursable expenses were included in “consideration” only from 14.05.2015, while the period under dispute was prior. Since the events were performed outside India and the situation was revenue-neutral due to eligible CENVAT credit, the demand was set aside and the appeal allowed.

Taxpayer Already Paid Liability Under Work Contract Services: CESTAT set Asides Service Tax Demand on Earth Excavation Services

M/s Abhilasha Enterprises vs Commissioner of Central Excise& CGST

CITATION : 2025 TAXSCAN (CESTAT) 1284

The Allahabad Bench of the CESTAT set aside a service tax demand of ₹30,34,350 on Earth Excavation Services for Abhilasha Enterprises, observing that the tax liability had already been discharged under the category of Works Contract Services. The Revenue alleged that the appellant had not separately declared receipts of ₹2,45,49,758 for excavation activities, but the appellant produced a CA certificate and reconciliation showing inclusion of these amounts in their ST-3 returns.

The Tribunal, relying on a verification report from the Additional Commissioner (Review) confirming payment of tax on Works Contract Services, held that the Earth Excavation Services tax liability had been met. Accordingly, the Tribunal partially allowed the appeal, setting aside the demand relating to Earth Excavation Services.

CESTAT Rules CENVAT Credit Refund Cannot Be Denied Due to Procedural Lapse of Filing Monthly Claims Instead of Quarterly

Commissioner of CG & ST vs M/s Harsoria Healthcare Pvt Ltd

CITATION : 2025 TAXSCAN (CESTAT) 1286

The Chandigarh Bench of the CESTAT held that refund of unutilized CENVAT credit cannot be denied merely because the claims were filed monthly instead of quarterly. In the case of Harsoria Healthcare Pvt. Ltd., an Export Oriented Unit, the department alleged violation of Notification No. 27/2012 for incorrect filing frequency and delayed debit of CENVAT credit. However, the Tribunal observed that these were only procedural lapses, and the conditions were complied with before the refund sanction.

The Tribunal further noted that the original sanction orders had attained finality since the department never challenged them, and thus the refunds could not be treated as erroneous for recovery under Section 11A. Upholding the Commissioner (Appeals)’ view that substantial benefit cannot be denied due to procedural irregularities, and relying on precedent including Chariot International Pvt. Ltd., the CESTAT dismissed the Revenue’s appeal.

Recovery u/s 11A is Unjustified as Refund Orders Had Attained Finality Without Appeal: CESTAT

Commissioner of CG &ST, Gurugram vs M/s Harsoria Healthcare Pvt Ltd

CITATION : 2025 TAXSCAN (CESTAT) 1286

The Chandigarh Bench of the CESTAT held that the Revenue Department cannot invoke Section 11A of the Central Excise Act to recover refunded amounts when the original refund orders, issued under Section 11B, were not challenged and had attained finality. In the case of Harsoria Healthcare Pvt. Ltd., an EOU that filed monthly refund claims for unutilized CENVAT credit, the Department issued a show cause notice alleging procedural lapses for not filing quarterly claims. However, the Tribunal noted that the refunds were granted through detailed speaking orders after due verification.

Relying on the ruling in Bridgestone India Pvt. Ltd., the Tribunal emphasized that Section 11A and Section 11B operate in separate domains, and once a refund becomes final, it cannot be reclassified as "erroneous" for recovery. Since the Revenue failed to appeal the original refund orders, the recovery proceedings were held to be without jurisdiction. The Tribunal dismissed the Revenue's appeal.

Dam and Powerhouse Construction Not Taxable: CESTAT Directs Refund to Be Processed u/s 11B

M/s. SNC Power Corporation (P) Limited vs Commissioner ofService Tax

CITATION : 2025 TAXSCAN (CESTAT) 1288

The Bangalore Bench of the CESTAT held that construction works related to dams and powerhouses fall within the statutory exclusion for dams under Section 65(25b) and Section 65(30a) of the Finance Act, 1994, and are therefore not liable to service tax. It relied on judicial precedents establishing that powerhouses and related structures are integral to dam functionality, rejecting the Revenue’s contention that such work was taxable.

Finding that the demand was unsustainable on merits, the Tribunal also held that the refund claimed by SNC Power Corporation Pvt. Ltd. must be processed strictly under Section 11B of the Central Excise Act, 1944, since the disputed amount was paid as tax pursuant to audit. The appeal was allowed, and the matter remanded to the original authority for refund processing as per law.

CESTAT Rules Testing Centre Reimbursements Beyond MCS Scope, Sets Aside Service Tax Demand on Eduquity Career Technologies

M/s. Eduquity Career Technologies Pvt. Ltd vs Commissioner ofService Tax

CITATION : 2025 TAXSCAN (CESTAT) 1289

The CESTAT Bangalore held that reimbursements received by Eduquity Career Technologies Pvt. Ltd. from BITS Pilani for establishing and maintaining testing centres for BITSAT could not be taxed under Management Consultancy Services. The Tribunal noted that these amounts were purely reimbursable expenses—covering infrastructure, real estate, equipment, and travel—and could not be added to the taxable value since Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 had been struck down by the Supreme Court in Intercontinental Consultants (2018).

Further, the Tribunal ruled that licence fees for customised software were also non-taxable, relying on the IBM India decision affirmed by the Supreme Court, which clarified that customised software was not taxable under MCS/BAS prior to 16 May 2008. Accordingly, the service tax demand on reimbursements and software licence fees was set aside, and the appeal was allowed in favour of Eduquity.

Exemption Under SEZ Act Cannot Be Denied Merely for Procedural Lapses: CESTAT Sets Aside Excise Demand on SEZ Supplies

ACE Enterprises vs Commissioner of CGST & Central Excise,Nashik

CITATION : 2025 TAXSCAN (CESTAT) 1290

The Mumbai Bench of CESTAT set aside the excise duty demand of ₹7,52,063 raised on ACE Enterprises for supplies to SEZ units, holding that exemption under Section 26 of the SEZ Act, 2005 cannot be denied for procedural lapses like non-filing of ARE-1 or omission in ER-1 returns when substantial compliance is established. The dispute arose from 45 consignments of “Apron Front Body PVC Disposable” cleared between 2015–16 and June 2017, with the appellant providing invoices, lorry receipts, SEZ gate entries, and online records confirming receipt by the SEZ units.

The Tribunal noted that the SEZ Act overrides earlier notifications, and supplies from the Domestic Tariff Area to SEZ units are treated as exports exempt from excise duty. It also rejected the claim that the SEZ units were closed, relying on official records confirming activity, and held that the appellant had substantially complied with the essential requirements. Accordingly, the duty demand, interest, and penalty were set aside, and the appeal was allowed.

UltraTech’s Installation and Operation of Fly Ash Collection System Not a Taxable Service to TNEB: CESTAT

Ultra Tech Cement Ltd. vs Commissioner of GST & CentralExcise

CITATION : 2025 TAXSCAN (CESTAT) 1291

The Chennai Bench of the CESTAT ruled that UltraTech Cement’s installation, operation, and maintenance of the Fly Ash Collection System at Mettur Thermal Power Station did not amount to a taxable service to TNEB. The Tribunal found that UltraTech installed the system at its own cost solely to secure fly ash—an essential raw material for cement manufacturing—and not to provide any commercial service.

Rejecting the Revenue’s allegation of “Business Support Service”, the Bench held that the arrangement under the MOU was mutually beneficial and not a service transaction, as TNEB did not provide any consideration to UltraTech. Since the activity was for the appellant’s self-use and not a taxable service, the appeal was allowed.

Reimbursement of ₹206/MT to UltraTech Not Consideration for Service: CESTAT Rejects Department’s Valuation for Service Tax Demand

Ultra Tech Cement Ltd. vs Commissioner of GST & CentralExcise

CITATION : 2025 TAXSCAN (CESTAT) 1291

The CESTAT Chennai held that the reimbursement of ₹206 per metric tonne received by UltraTech Cement from India Cements was merely a sharing of overhead and operational expenses related to the Fly Ash Collection System at Mettur Thermal Power Station, and not consideration for any taxable service. The Tribunal noted that no payment was made by TNEB to UltraTech, and the reimbursement had no nexus to any service rendered to TNEB.

Rejecting the Revenue’s view that the reimbursement should form the basis for valuing an alleged service to TNEB, the Bench emphasized that the amount reflected only India Cements’ share of costs and could not be applied to the entire fly ash generated. With no evidence of disguised consideration, the appeal was allowed, and the service tax demand was set aside.

CESTAT Quashes Customs Broker Licence Suspension, Holding No Mens Rea or Procedural Lapse Proven

M/s Karan Logistics vs Commissioner of Customs

CITATION : 2025 TAXSCAN (CESTAT) 1292

The Chandigarh Bench of the CESTAT set aside the suspension of the Customs Broker Licence of Karan Logistics, ruling that no mens rea, collusion, or violation of the CBLR, 2018 was proven. The case arose from alleged fraudulent availing of excess RoSL benefits by an exporter, Krystfab Enterprises, whose whereabouts became untraceable. The Department attributed failure of due diligence to the Customs Broker, but the Tribunal noted that all export documentation, verification, and Let Export Orders were processed by Customs authorities and no forged documents were alleged.

The Bench observed that the licence had already been suspended or revoked multiple times since 2018 and termed the fresh suspension as excessive, disproportionate, and vindictive. Citing principles of proportionality and the Delhi High Court ruling in Ashiana Cargo Services, the Tribunal held that livelihood cannot be denied without solid evidence. The appeal was allowed, and the suspension order was quashed.

UltraTech Entitled to Full CENVAT Credit on Fly Ash O&M Services: CESTAT Rules Dept Cannot Restrict Credit

Ultra Tech Cement Ltd vs Commissioner of GST & CentralExcise

CITATION : 2025 TAXSCAN (CESTAT) 1293

The Chennai Bench of the CESTAT held that UltraTech Cement was entitled to full CENVAT credit on service tax paid for the operation and maintenance of the Fly Ash Collection System at Mettur Thermal Power Station. The Tribunal found that the subcontractor provided services exclusively to UltraTech, and the activity was directly linked to the procurement of fly ash—an essential input for cement manufacturing.

Rejecting the Revenue’s argument that credit should be proportionate to the fly ash actually consumed by UltraTech, the Bench noted that earlier orders in UltraTech’s own case had already affirmed full credit eligibility and had attained finality. Since the services were used entirely by UltraTech and there was no privity of contract with other entities, the appeal was allowed.

Copolymer vs. Homopolymer: CESTAT Raps Customs for confirming ADD on PVC Import without Verifying Material Composition

KPL International Limited vs Commissioner of Customs (NS-I)

CITATION : 2025 TAXSCAN (CESTAT) 1295

The Mumbai Bench of CESTAT set aside a demand of ₹55,93,194 for anti-dumping duty (ADD) on PVC copolymer imports by KPL International Limited, noting that the Customs authority failed to examine the technical composition of the goods to determine whether the resin was a homopolymer or copolymer. The appellant contended that the imports were vinyl chloride–vinyl acetate copolymers, excluded from ADD under the relevant notification, and submitted chemical composition details and earlier tribunal precedents in support.

The Tribunal held that confirming ADD based solely on generic product descriptions without scrutinizing the actual imported material amounted to non-application of mind. It emphasized that self-assessment does not absolve the officer from verifying goods and issuing a speaking order. Consequently, the matter was remanded to the original authority for fresh adjudication after proper technical verification and classification.

CESTAT Quashes ₹45 Lakh Penalty Under Rule 26 for Inapplicability Without Confiscation of Goods

Shri Venkat R. Chari vs C.C.E. & S.T. – Daman

CITATION : 2025 TAXSCAN (CESTAT) 1296

The Ahmedabad Bench of CESTAT allowed Shri Venkat R. Chari’s appeal, holding that the personal penalty of ₹45 lakh under Rule 26 of the Central Excise Rules, 2004, was unsustainable in the absence of goods liable for confiscation. The dispute arose from allegations of involvement in a rebate scam by Shri Krishna Impex, where the department claimed issuance of fictitious invoices, wrongful CENVAT credit, and export irregularities. The appellant contended that he was merely an employee with no role in business decisions or fraudulent activities and received no personal benefit beyond his salary.

The Tribunal noted that witnesses confirmed the appellant’s non-involvement and that the goods and exports were genuine. It emphasized that Rule 26 penalties apply only when goods are liable for confiscation, which was not the case here. The Tribunal found no evidence of malfeasance or personal liability beyond the appellant’s employment role and set aside the penalty, allowing the appeal.

CESTAT Sets Aside Tax on Club Membership Fees, Citing Supreme Court’s Kolkata Club Decision

M/s. Lotus Club vs The Commissioner of Central Excise

CITATION : 2025 TAXSCAN (CESTAT) 1297

The Bangalore Bench of CESTAT allowed two appeals filed by Lotus Club, holding that service tax on membership fees and subscription charges was unsustainable in light of the Supreme Court’s ruling in State of West Bengal vs. Kolkata Club Ltd. (2019). The dispute arose over alleged non-payment of service tax under “Membership of Club or Association Service” for 2005–06 to 2010–11, while other demands for renting immovable property and advertising were either dropped or not contested. The Tribunal noted that the only issue remaining was the tax on membership fees, as the club had begun paying service tax under “Hotel, Inn, Club and Guest House Service” from July 2011.

Relying on the Supreme Court precedent, the Tribunal observed that a club and its members cannot be treated as distinct persons for levy purposes, and transactions between them fall under the doctrine of mutuality. Consequently, the demands under “Membership of Club or Association Service” and related penalties were held unsustainable. The Tribunal set aside the impugned orders in both appeals and allowed them with consequential relief.

Dilution and Repacking of Seaweed Extract Not Amounting to Manufacture: CESTAT Holds Excise Demand Unsustainable

M/s Dhanuka Agritech Ltd. vs Commissioner of Central Excise,Jammu &Kashmir

CITATION : 2025 TAXSCAN (CESTAT) 1298

The Chandigarh Bench of CESTAT allowed Dhanuka Agritech Ltd.’s appeals, holding that dilution and repacking of imported seaweed extract for its bio-stimulant “Dhanzyme” does not constitute manufacture, and therefore the excise duty demand was unsustainable. The department had alleged that the appellant manufactured “Dhanzyme” and cleared it without duty, but the appellant demonstrated that the process involved only dilution with water and stabilizers, creating no new, distinct, or marketable product.

The Tribunal, relying on earlier CESTAT rulings and Supreme Court approval in the appellant’s own cases, observed that the activity did not satisfy the statutory definition of manufacture under Section 2(f) of the Central Excise Act, 1944. As excise duty applies only to manufactured goods, the Tribunal set aside the impugned orders, allowed the appeals, and confirmed that the dilution and repacking process does not attract excise duty.

Transfer of Development Rights Not ‘Service’: CESTAT Sets Aside Common Order Confirming ₹24 Cr Service Tax Demand on Omaxe-Linked Entities

M/s Vineera Colonisers Private Limited vs Additional DirectorGeneral, DGGSTI, New Delhi

CITATION : 2025 TAXSCAN (CESTAT) 1301

The Principal Bench of CESTAT, New Delhi, granted major relief to sixteen land-owning companies associated with M/s Omaxe Limited by setting aside a cumulative service tax demand of ₹24.20 crore, including interest and penalties. The Department had alleged that the transfer of development rights (TDR) by these companies to Omaxe Limited amounted to a taxable service under Section 66E of the Finance Act, 1994. The appellants contended that the transfer of TDR constitutes transfer of immovable property, which is explicitly excluded from the definition of “service” under Section 65B(44). The Tribunal noted that the land-owning companies merely held land on behalf of Omaxe, while Omaxe undertook all development, marketing, and sale activities, and therefore no taxable service was rendered by the appellants.

Relying on judicial precedents from CESTAT and High Courts, the Bench comprising Binu Tamta and Hemambika R. Priya held that the transfer of development rights cannot be brought within the ambit of service tax. The Tribunal rejected the Department’s attempt to distinguish prior decisions based on the number of parties involved, emphasizing that the legal principle applies regardless. Consequently, the common adjudication order was set aside, all sixteen appeals were allowed, and the principle was reaffirmed that benefits arising from land, including development rights, are immovable property and not subject to service tax.

Customer Evaluation & Loan Recovery for Banks Squarely Falls Under BAS: CESTAT Dismisses Appeal

M/s. Srivari Enterprises vs Commissioner of GST & CentralExcise

CITATION : 2025 TAXSCAN (CESTAT) 1306

The Chennai Bench of CESTAT upheld the levy of service tax on M/s Srivari Enterprises, dismissing its appeal against the demand of ₹24,85,489 for the period April 2010 to March 2011. The Tribunal held that the appellant’s services—customer evaluation and recovery support for banks and financial institutions—fall squarely under Business Auxiliary Services (BAS) as incidental or auxiliary to the banks’ core lending operations. It observed that the show cause notice adequately referred to Section 65(19)(vii), and the appellant’s arguments regarding vagueness or alternative classification were without merit.

The Tribunal also emphasized that the appellant’s identical earlier case had already been decided against them, and no change in facts or evidence justified a different outcome. Following judicial discipline and consistent application of law, CESTAT affirmed the BAS classification and upheld the service tax demand along with interest and penalties, dismissing the appeal in full.

CESTAT Sets Aside Service Tax Demand on GTA Services, Holding Liability Lies on Consignors/Consignees Under RCM

M/s. Seaport Logistics Pvt. Ltd vs Commissioner of GST &Central Excise

CITATION : 2025 TAXSCAN (CESTAT) 1309

The Chennai Bench of CESTAT granted relief to M/s Seaport Logistics Pvt. Ltd., setting aside service tax demands under the Reverse Charge Mechanism (RCM) for Goods Transport Agency (GTA) services and deleting the penalty under Section 78 of the Finance Act, 1994. The Tribunal relied on its earlier ruling in the assessee’s own case, holding that the liability to pay service tax on GTA services rests with the consignor or consignee, not the GTA. Since the recipients had already discharged the applicable tax, Seaport Logistics was under no obligation to pay, and the adjudicating authority’s demand based on alleged discrepancies was unsustainable.

Regarding the Section 78 penalty for port services and renting of immovable property, the Tribunal noted that a substantial portion of the tax had already been paid, and there was no evidence of fraud, suppression, collusion, or wilful misstatement. Observing that the statutory conditions for imposing the penalty were not met, CESTAT set aside the penalty. Both appeals were allowed, granting consequential relief to the appellant.

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