CESTAT Weekly Round-up

Amounts Collected During Central Excise Investigation Must Be Refunded After Demand is Set Aside: CESTAT

M/s.Sri Cornation Fireworks P. Ltd. vs The Commissioner of GST &Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 102

The Chennai Bench of CESTAT held that amounts collected during investigation cannot be retained by the department once the underlying service tax demand is set aside, and such amounts must be refunded with applicable interest. In the case of Sri Coronation Fireworks Pvt. Ltd. and related entities, substantial sums were paid in 2021 during DGGI investigation, prior to issuance of show cause notices. Although the Tribunal had earlier set aside the entire demand in March 2024, the department refunded only 7.5% by treating the payments as pre-deposit under Section 35F, a view upheld by the Commissioner (Appeals).

Allowing the appeals, the Tribunal ruled that Section 35F applies only to statutory deposits made for filing appeals and not to amounts collected during investigation. Since the payments were made voluntarily before adjudication and the demand itself had been quashed, the department lacked authority to retain any part of the amount, in violation of Article 265 of the Constitution. Consequently, the Tribunal directed refund of the entire amounts collected during investigation along with applicable interest.

Works Contract Service Tax Demand of Rs. 2.30L: CESTAT Orders Fresh Assessment of Abatement and Reverse Charge Benefits

Joydeb Dey vs Commissioner of CGST & Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 105

The Kolkata Bench of CESTAT remanded a service tax demand of ₹2.30 lakh against M/s Joydeb Dey for FY 2014–15 relating to Works Contract Service, directing fresh adjudication. The demand arose from allegations of non-filing of ST-3 returns and suppression of taxable value. While the Commissioner (Appeals) had upheld the demand, the appellant contended that relevant challans, invoices, and contracts were submitted but not properly considered.

The Tribunal held that although the documents were acknowledged, no computation of actual tax liability or examination of eligibility under Notification No. 30/2012 (reverse charge and abatement) was undertaken. Observing that the documents were sufficient to assess the nature of the contracts and tax liability, the Tribunal remanded the matter to the Commissioner (Appeals) to re-examine the evidence, determine eligibility for reverse charge and abatement, compute the demand accordingly, and pass a reasoned order within three months after granting due hearing to the appellant.

CESTAT Remands ₹3.90 Crore Sun Pharma Case, Holds Deemed Exports to be Considered For DTA Entitlement

Sun Pharmaceuticals Industries vs Commissioner of CGST

CITATION : 2026 TAXSCAN (CESTAT) 106

The Ahmedabad Bench of CESTAT remanded a ₹3.90 crore excise duty demand against Sun Pharmaceuticals Industries Ltd., a 100% Export Oriented Unit, holding that the FOB value of deemed exports must be clubbed with physical exports while calculating Domestic Tariff Area (DTA) sales entitlement. The demand arose from allegations that Sun Pharma exceeded the permissible DTA limit during April 2011 to February 2014 by clearing goods at concessional duty under Notification No. 23/2003-CE. The appellant argued that inclusion of deemed exports under the Foreign Trade Policy would keep DTA clearances within permissible limits and that the goods cleared domestically were similar to exported goods.

The Tribunal observed that settled judicial precedents, including Supreme Court rulings, support inclusion of deemed exports’ FOB value for DTA entitlement calculation. However, it noted that verification was required on the product-wise 90% FOB export cap and on the technical issue of similarity of pharmaceutical products. Accordingly, the impugned order was set aside and the matter remanded to the adjudicating authority for fresh examination of all issues after allowing the appellant to submit technical evidence.

Service Tax Demand upheld for Willful Suppression and Non-Filing of Returns: CESTAT Confirms ₹1.30 Lakh on Works Contract and Erection Services

M/s Om Electrical vs Commissioner of Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 107

The Allahabad Bench of CESTAT upheld a ₹1.30 lakh service tax demand against M/s Om Electrical for FY 2016–17, confirming invocation of the extended period of limitation under Section 73(1) due to willful suppression and intent to evade tax. The appellant had received ₹1.61 crore towards taxable services but neither filed ST-3 returns nor responded to repeated departmental notices seeking reconciliation and statutory documents. While the Commissioner (Appeals) dropped the demand relating to services provided to UPPCL under the reverse charge mechanism, the demand on works contract services to IRCON and erection services to IL&FS was sustained.

The Tribunal held that deliberate non-filing of returns and non-cooperation despite substantial receipts justified extended limitation, rejecting the plea of time-bar. It confirmed service tax of ₹1,30,356 along with interest, equal penalty under Section 78, late fee of ₹40,000 under Section 70(1), and penalty of ₹10,000 under Section 77(1)(c). Finding no infirmity in the impugned order, the Tribunal dismissed the appeal.

Relief for Sun Pharma Lab: CESTAT Grants Excise Duty Refund of Rs. 64.32 Cr Despite Citing Incorrect Exemption Notification

M/s. Sun Pharma Laboratories Limited vs Commissioner of C.G.S.T. and Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 108

The Kolkata Bench of CESTAT allowed Sun Pharma Laboratories Ltd.’s refund claim of ₹64.32 crore along with interest, holding that the refund could not be denied merely due to an incorrect mention of the exemption notification. Sun Pharma, operating an eligible unit in Sikkim, had filed refund claims for excise duty paid in cash during February 2016 to January 2017 but mistakenly cited Notification No. 56/2003-CE instead of the applicable Notification No. 20/2007-CE. Although the lower authorities rejected the claims on this technical ground, the appellant contended that the error was clerical and that it fulfilled all substantive conditions of the correct notification.

The Tribunal observed that both notifications were identical in terms of conditions and benefits, differing only in their operative periods, and that there was no dispute regarding the appellant’s eligibility under Notification No. 20/2007-CE. Relying on the Supreme Court ruling in Share Medical Care v. Union of India, the Tribunal held that substantive benefits cannot be denied for procedural mistakes when eligibility is otherwise established. Accordingly, it set aside the impugned orders and directed the department to grant the refund of ₹64.32 crore with interest at 6% after three months from the date of filing of the original claims.

Cinema Revenue Sharing Not Taxable as Renting of Immovable Property: CESTAT sets aside Service Tax Demand on Theatre

Kavitha Theatre vs Commissioner of Central Excise and Service Tax

CITATION : 2026 TAXSCAN (CESTAT) 109

The Bengaluru Bench of CESTAT set aside the service tax demand against Kavitha Theatre, holding that exhibition of films under a revenue-sharing arrangement does not constitute “renting of immovable property service” under the Finance Act, 1994. The Tribunal observed that under such agreements, the theatre owner and film distributor share box-office collections in a predetermined ratio without any fixed or assured rent, reflecting a joint business venture where income depends on the commercial performance of the films.

Relying on the CBIC Circular dated 23.02.2009 and the affirmed precedent in Inox Leisure Ltd., the Tribunal held that revenue sharing represents sharing of business profits and not rent, and therefore lacks a service provider–service recipient relationship. Since the Supreme Court had already upheld this principle, the issue was no longer resolved. Accordingly, the CESTAT quashed the service tax demand along with interest and penalties and allowed the appeal in full.

Incidence of Differential Duty Not Transferred to Third Parties: CESTAT Grants BPCL’s ₹6.6Cr Protest Refund u/s 11B

Bharat Petroleum Corporation Limited vs Commissioner of CGST & Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 110

The Mumbai Bench of CESTAT allowed Bharat Petroleum Corporation Limited’s refund claim of ₹6.62 crore, holding that the differential excise duty paid under protest was not passed on to buyers and thus satisfied the conditions of Section 11B of the Central Excise Act, 1944. BPCL had cleared petroleum products on 12 November and 2 December 2014 at pre-revised duty rates, while enhancement notifications were issued later the same days. Though BPCL deposited the differential duty under protest, it argued that the notifications were not legally enforceable on the dates of clearance as they were neither published in the Gazette nor made available to the public, and that its invoices proved no additional duty burden was passed on.

Rejecting the Revenue’s stand, the Tribunal held that duty-enhancing notifications become effective only upon proper publication and public availability, relying on settled precedents including Param Industries and G.S. Chatha Rice Mills. Since these conditions were not met at the time of clearance, BPCL was not liable to the enhanced duty. The Tribunal further held that unjust enrichment was not attracted as the duty incidence was not transferred to third parties, and accordingly set aside the impugned orders, directing refund of the entire ₹6.62 crore.

Excise Duty Hike Notification Not Published In Gazette When Goods Cleared: CESTAT Rejects Revenue’s Demand on BPCL

Bharat Petroleum Corporation Limited vs Commissioner of CGST & Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 110

The Mumbai Bench of CESTAT granted relief to Bharat Petroleum Corporation Limited (BPCL), holding that excise duty enhancement Notifications No. 22/2014-CE and 24/2014-CE were not enforceable on the dates of clearance as they were neither published in the Gazette nor made available to the public when BPCL cleared petroleum products from its Mumbai and Kochi refineries. The Tribunal accepted BPCL’s contention that under Section 5A(5) of the Central Excise Act, a duty-altering notification becomes operative only upon publication and public availability, conditions which were admittedly not met since the goods were cleared during business hours and the notifications were made accessible only later in the day.

Rejecting the Revenue’s argument that issuance alone was sufficient, the Tribunal relied on Supreme Court rulings in Param Industries and G.S. Chatha Rice Mills to hold that enforceability arises only upon public dissemination. The Bench further found that BPCL had paid the differential duty of ₹6.62 crore under protest and conclusively proved through invoices that the enhanced duty was not passed on to buyers, thereby negating unjust enrichment. Accordingly, the impugned orders were set aside and BPCL’s refund claims were allowed in full.

CESTAT raises Contradictions in VCES Compliance; Remands 34.68 lakhs Service Tax Demand against Sun Direct Distributor

Shri M. Viswanathan vs Commissioner of GST & Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 111

The Chennai Bench of CESTAT remanded a ₹34.68 lakh service tax dispute involving M. Viswanathan, a Sun Direct distributor, after finding serious inconsistencies in the records relating to payments claimed under the Voluntary Compliance Encouragement Scheme (VCES). The demand, covering April 2008 to March 2013, arose from alleged non-payment of service tax on commission and installation services. The appellant contended that Sun Direct had already discharged service tax on the full MRP of recharge vouchers, subsuming the distributor’s margin, and further claimed that service tax liability had been settled under VCES, though the lower authorities rejected this plea without proper verification.

The Tribunal held that the orders were unsustainable as the authorities failed to verify conflicting challans, VCES declarations, and payment figures, and wrongly ignored the VCES claim on procedural grounds. It also noted that no examination was undertaken on whether Sun Direct’s tax payment covered the distributor’s commission. Observing that the case involved mixed questions of fact requiring detailed scrutiny, CESTAT set aside the impugned order and remanded the matter for de novo adjudication after thorough verification and granting a full opportunity of hearing to the appellant.

Mere Wrong Classification Does Not Invoke Section 111(o) Unless Exemption Conditions are Violated: CESTAT

M/s Kasturi International Appellant Private Limited vs Commissioner of Customs, ICD (Import)

CITATION : 2026 TAXSCAN (CESTAT) 112

The New Delhi Bench of CESTAT held that mere wrong classification of imported goods does not attract confiscation under Section 111(o) of the Customs Act unless there is a violation of conditions attached to an exemption notification. In the case of Kasturi International Pvt. Ltd., the Tribunal noted that the department’s allegation was limited to wrongful availment of exemption under Notification No. 152/2009-Cus due to incorrect classification, and not breach of any specific condition prescribed under the notification.

The Tribunal clarified that Section 111(o) applies only when goods are exempt subject to conditions and such conditions are not fulfilled. Claiming an inapplicable exemption due to wrong classification cannot be equated with violation of exemption conditions. Consequently, the finding of confiscation under Section 111(o) was set aside, and since the penalty under Section 112 was consequential to confiscation, it too was quashed.

Coated Paper Imported in Rolls Classified under CTH 4810 13 90, Residual Entry Not Applicable: CESTAT

M/s Kasturi International Appellant Private Limited vs Commissioner of Customs, ICD (Import)

CITATION : 2026 TAXSCAN (CESTAT) 112

The New Delhi Bench of CESTAT upheld reclassification of 50 GSM coated paper imported in rolls by Kasturi International Pvt. Ltd. under CTH 4810 13 90, rejecting the importer’s claim under the general category CTH 4810 19 90. The Tribunal noted that the goods were undisputedly imported in roll form and contained less than 10% mechanically processed fibre, attracting the specific tariff entry applicable to coated paper in rolls. Accordingly, the exemption claimed under Notification No. 152/2009-Cus was denied and differential customs duty with interest was confirmed.

The Tribunal held that CTH 4810 19 applies only where the goods are neither in rolls nor sheets and cannot override a specific entry covering paper in rolls. It also rejected the alternative plea under CTH 4810 29 00 for lack of supporting evidence and observed that past clearances cannot determine correct classification. Concluding that tariff classification must strictly follow the wording of the tariff and physical form of the goods, CESTAT upheld the impugned orders.

Customs Cannot Enhance Value Without Proof of Undervaluation or Treat Counterfeit Goods as Branded: CESTAT

M/s. Barfo Impex vs Principal Commissioner

CITATION : 2026 TAXSCAN (CESTAT) 113

The Principal Bench of CESTAT, New Delhi, held that Customs authorities cannot enhance the value of imported goods without concrete proof of undervaluation and that counterfeit or fake-branded goods cannot be treated as branded goods for valuation or penalty purposes. In the case of Barfo Impex, the department alleged suppression of brand details and undervaluation of imported automobile parts, re-determined the value, demanded differential duty, confiscated the goods, and imposed penalties despite not issuing a show cause notice. The appellant argued that the goods were unbranded or counterfeit, that no evidence of extra consideration or comparable imports existed, and that valuation rules and principles of natural justice were violated.

The Tribunal held that the burden of proving undervaluation lies on the department, which failed to rely on contemporaneous import data or follow the prescribed valuation rules. It observed that most goods were found to be fake and could not be treated as branded, and even admittedly correctly valued unbranded goods were unjustifiably enhanced. Noting denial of natural justice due to non-confrontation of evidence, CESTAT set aside the valuation enhancement, confiscation, and penalties, allowing the appeals in full.

Dietary Supplements Not Eligible For Area-Based Excise Exemption Meant For Pharmaceuticals: CESTAT

M/s Orchid Bio-Tech Pvt. Ltd vs Commissioner

CITATION : 2026 TAXSCAN (CESTAT) 114

The Delhi Bench of CESTAT held that dietary food supplements cannot be classified as pharmaceutical products and are not eligible for area-based excise duty exemption under Notification No. 49/2003-CE. In the case of Orchid Bio-Tech Pvt. Ltd., the Tribunal noted that the company manufactured tablets, capsules, syrups, and drops under food licences and not drug licences, yet misclassified them under Chapter 30 to claim exemption. Relying on Chapter Note 1(a) of Chapter 30, which expressly excludes food supplements, the Tribunal upheld their classification under tariff heading 21069099.

The Tribunal found that the company had knowingly mis-declared the nature of its products to wrongly avail exemption, justifying denial of the benefit, invocation of the extended period of limitation, and imposition of penalty under Section 11AC. Rejecting the plea of violation of natural justice and absence of intent, CESTAT upheld the demand, interest, and penalties and dismissed the appeal.

Raw Materials Transferred From Domestic Tariff Area to EOU are Not ‘Imported’ Goods: CESTAT

Responsive Industries Ltd vs Commissioner of Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 115

The Mumbai Bench of CESTAT held that raw materials supplied from the Domestic Tariff Area to an Export Oriented Unit do not become “imported goods” merely because the supplier availed deemed export benefits under the Foreign Trade Policy. In the case of Responsive Industries Ltd., an EOU, the department denied the concessional duty benefit under Notification No. 23/2003-CE on DTA clearances, alleging that raw materials procured from Reliance Industries Ltd. were deemed imports since the supplier had claimed export benefits. On this basis, a demand of ₹1.92 crore with interest and penalties was confirmed.

Rejecting the department’s stand, the Tribunal held that the concept of deemed export exists only under the Foreign Trade Policy and has no application under the Customs Act or Central Excise law. It observed that deemed exports are domestic transactions and do not convert indigenous goods into imported goods. As there was no evidence that the raw materials were actually imported or sourced from another EOU, the condition of the notification was satisfied. Accordingly, CESTAT set aside the impugned order and allowed the appeal.

Even if Service Tax Not Payable on Detention Charges, Credit Cannot be Denied once Tax is Paid: CESTAT

Shyam Ferro Alloys Ltd vs Commissioner of CGST & Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 117

The Kolkata Bench of CESTAT set aside a demand of ₹4.16 lakh along with interest and penalties against Shyam Ferro Alloys Ltd., holding that CENVAT credit cannot be denied merely because service tax was not legally payable on detention or demurrage charges. The Tribunal observed that the appellant had paid the service tax charged by shipping lines and port authorities, disclosed the same in ST-3 returns, and used the services in the course of manufacturing and export. Once tax is paid and the receipt and utilization of input services are undisputed, credit cannot be denied even if the levy is later found to be not required.

The Tribunal further held that the demand was time-barred as it was based entirely on disclosed records, with no suppression or misstatement to justify extended limitation. Rejecting the Revenue’s contention that the appellant should have sought refund instead of availing credit, the Bench held that the situation was revenue-neutral and credit denial was legally unsustainable. Accordingly, the impugned order was set aside and full relief was granted to the appellant.

Non-Existent or Non-Goods Vehicle Numbers in Invoices alone cannot Deny CENVAT Credit: CESTAT

M/s. Super Shakti Metaliks Pvt. Ltd vs Commissioner of CGST & Central Excise

CITATION : 2026 TAXSCAN (CESTAT) 118

The Kolkata Bench of CESTAT held that reliance solely on VAHAN portal data and statements of vehicle owners is insufficient to establish non-receipt of goods and cannot be the basis for denying CENVAT credit. The Tribunal observed that owners of non-commercial vehicles would naturally claim their vehicles were not used for commercial transport, which by itself does not substantiate the Revenue’s allegation. It noted that discrepancies in vehicle numbers, especially during a period of incomplete digitisation, could not conclusively prove that goods were not transported or received.

The Tribunal found that the appellants had purchased inputs against valid excise invoices, made payments through banking channels, duly recorded the inputs in statutory records, and used them in manufacturing finished goods cleared on payment of duty. Citing earlier precedents, the Bench held that absence of evidence showing diversion or non-utilisation of inputs makes denial of credit unsustainable. Accordingly, the order denying CENVAT credit of about ₹9.09 lakh and imposing penalties was set aside and the appeals were allowed.

Mere Shortage of Sugar Does Not Establish Clandestine Removal without Corroborative Evidence: CESTAT

M/s Rana Sugar Ltd vs Principal Commissioner of Central Goods & Services Tax

CITATION : 2026 TAXSCAN (CESTAT) 119

The Allahabad Bench of CESTAT held that a mere shortage of sugar does not establish clandestine removal in the absence of corroborative evidence. Rana Sugar Ltd. faced a demand and penalty after a departmental inspection noted a stock shortage, but no additional evidence—such as statements of buyers, transporters, or proof of sale proceeds—was produced to support the allegation. The Tribunal emphasized that sugar is a controlled commodity, and its regulated movement further weakens claims based solely on stock discrepancies.

The Tribunal observed that the burden of proving clandestine removal lies on the department, requiring positive evidence of transportation, sales, or receipt of funds. Since the department failed to produce any such evidence even after remand, the Tribunal concluded that the excise duty demand and penalty based solely on the shortage were unsustainable and set aside the order.

Weigh Scales at Sugarcane Collection Centres Eligible for CENVAT Credit as Functionally Integrated With Manufacturing: CESTAT

M/s Rana Sugar Ltd vs Principal Commissioner of Central Goods & Services Tax

CITATION : 2026 TAXSCAN (CESTAT) 119

The Allahabad Bench of CESTAT held that CENVAT credit is admissible on weigh scales installed at sugarcane collection centres if they are functionally connected to the manufacturing process. Rana Sugar Ltd. had claimed credit for weigh scales used to measure sugarcane procured from farmers, but the department denied it on the ground that the scales were located outside the factory premises. The appellant contended that weighing sugarcane is an essential activity in sugar manufacturing and the scales were not permanently removed from the factory.

The Tribunal observed that weighment of sugarcane is integral to the manufacturing process and that mere installation outside the factory does not disqualify the credit, provided the scales are directly used in production and not diverted for other purposes. Noting that the scales were used during the crushing season and were not permanently removed, the bench held the denial of CENVAT credit was unjustified and set aside the impugned order.

GTA Reverse Charge Not Applicable Where Freight Cost is Economically Borne by Farmers: CESTAT

M/s Rana Sugar Ltd vs Principal Commissioner of Central Goods & Services Tax

CITATION : 2026 TAXSCAN (CESTAT) 119

The Allahabad Bench of CESTAT held that Rana Sugar Ltd. is not liable to pay service tax under the Goods Transport Agency (GTA) reverse charge mechanism where the economic burden of freight is borne by farmers. The department had demanded service tax on transportation of sugarcane from the farmers’ fields to the factory, arguing that since the appellant arranged and paid the freight, it was liable under reverse charge. The appellant contended that freight costs were ultimately deducted from the sugarcane price, meaning the economic burden fell on the farmers.

The Tribunal observed that reverse charge liability depends on who bears the actual economic burden. Since the appellant did not bear the freight cost in economic terms, merely arranging transportation did not make it the recipient of GTA services. Accordingly, the bench held that service tax under the GTA reverse charge mechanism was not payable, and set aside the demand, interest, and penalties.

Post-Commissioning Receipt of Capital Goods Does Not Bar CENVAT Credit absent Proof of Exclusive Civil Use: CESTAT

M/s Rana Sugar Ltd vs Principal Commissioner of Central Goods & Services Tax

CITATION : 2026 TAXSCAN (CESTAT) 119

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has clarified that Rana Sugar Ltd. is entitled to avail CENVAT credit on capital goods received even after the factory had commenced operations. The department had denied credit on the ground that the goods, received post-commissioning, could not have been used for supporting plant and machinery and were allegedly utilized exclusively for civil structures or sheds. The appellant, however, contended that in any manufacturing unit, receipt of capital goods is a continuous and ongoing process, and there is no statutory requirement that such goods must be received prior to the commencement of production. Moreover, the department did not furnish any evidence to establish that the capital goods were exclusively used for civil construction, and mere timing of receipt cannot be treated as a basis to deny credit.

The Tribunal observed that the department’s reliance solely on the fact that the factory had started production was insufficient to conclude that the capital goods were not used for the manufacturing process. It emphasized that CENVAT credit cannot be denied merely because goods arrived after the factory became operational, unless it is specifically shown that they were used exclusively for civil structures. The bench reiterated that receipt and utilization of capital goods in manufacturing is a continuous activity, and in the absence of any proof to the contrary, denial of credit was unjustified. Accordingly, the Tribunal set aside the impugned order and allowed the appellant to claim CENVAT credit on the post-commissioning capital goods.

Juniper Router Components are ‘Parts’, Not Network Interface Cards: CESTAT Sets Aside Customs Demand Against Bharti Airtel

Bharti Airtel Limited vs Principal Commissioner of Customs

CITATION : 2026 TAXSCAN (CESTAT) 120

The Principal New Delhi Bench of CESTAT ruled in favor of Bharti Airtel, holding that various telecom components imported for use in Juniper routers—such as Modular Port Concentrators, Modular Interface Cards, Switch Control Boards, and Switch Fabric Boards—are classifiable as “parts of routers” under Customs Tariff Item 8517 70 90 and not as Network Interface Cards under 8517 62 90. The tribunal observed that these components have no independent functional utility and cannot operate on their own without the router chassis and other interdependent parts, relying on a certificate from Juniper Networks confirming their status as router components.

The Tribunal further held that Network Interface Cards are standalone devices capable of independent operation, which distinguished them from the imported items. It also noted that mere self-assessment or a difference of opinion on classification does not justify invoking the extended period under Section 28(4). Accordingly, the tribunal set aside the customs demand, interest, and penalties, and allowed the appeal, confirming that the imported goods were correctly classified as parts of routers.

Cargo Forwarder’s Pre-2012 Services Classifiable as ‘Transportation of Goods by Air’, Not BAS: CESTAT

M/s Delmos Aviation Private Limited vs The Principal Commissioner of Central Goods & Service Tax

CITATION : 2026 TAXSCAN (CESTAT) 121

The Principal New Delhi Bench of CESTAT ruled in favor of Delmos Aviation Pvt. Ltd., holding that the services it provided before 1 July 2012 were classifiable as “Transportation of Goods by Air” and not as “Business Auxiliary Service.” Delmos, acting as a General Sales and Service Agent for Aeroflot, offered exporters complete cargo transportation packages—including domestic movement, international air transport, and handling services—issued Airway Bills in its own name, collected consolidated payments, and paid airlines and other service providers separately. The tribunal observed that the appellant bore commercial risk and was providing the service on a principal-to-principal basis, rather than merely acting as an agent earning commission.

The Tribunal emphasized that service tax liability must be determined based on the actual nature of the service, not merely contractual descriptions. It noted that the definition of “aircraft operator” under the Finance Act does not require ownership or operation of aircraft, covering any person providing air transport of goods. Since Delmos effectively provided the transportation service itself, the Tribunal held that its services fell under the exempt category of Transportation of Goods by Air, set aside the service tax demand for the period before 1 July 2012, and allowed the appeal.