CESTAT Weekly Round-Up [July 14 to July 19, 2025]

This weekly round-up analytically summarizes the key stories related to the Customs Excise and Service Tax Appellate Tribunal (CESTAT) reported at Taxscan from July 14, 2025 to July 19, 2025.

CESTAT Quashes ₹1.5 Crore Penalty on Customs Officer in Red Sanders Smuggling Case Due to Lack of Corroborative Evidence

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the penalty imposed on a Customs officer accused in a red sanders smuggling case could not be sustained in the absence of reliable and corroborative evidence. The appellant’s counsel argued that he had no connection with the smuggling syndicate and denied knowing or interacting with any of the individuals who gave statements against him. It was argued that the statements were vague, contradictory, and retracted, and could not be used as sole evidence without corroboration.

Win for BSNL: CESTAT Rules Free Telecom Services to Employees Not Taxable as It Constitutes Service to Self

The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled in favour of Bharat Sanchar Nigam Limited (BSNL), holding that free telecom services provided to employees were not taxable as they constituted service to self. The assessee also referred to other tribunal decisions, including Executive Engineer E, C/O BSNL and Gondwana Club, which held that services provided to oneself or within the employer-employee relationship were not taxable. A CBEC circular was also cited, confirming that no service tax was due when services were provided free of charge.

No Service Tax Chargeable on Warranty Labour for Free After-Sale Service: CESTAT

The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that no service tax was chargeable on warranty labour charges for free after-sale services. It also found no evidence of separate reimbursement by the vehicle manufacturer for these services. Since no direct service charges were received from customers and no specific reimbursement was established, the appellate tribunal held that service tax and penalties were not justified.

Relief for Castrol India: CESTAT Rules SAD Refund Cannot Be Denied Solely Due to Brand Name Change When Product Is Identical

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a Special Additional Duty (SAD) refund under Notification No. 102/2007-Cus cannot be denied merely because the product was sold under a different brand name, as long as the imported and sold goods are materially the same. The appellant's counsel argued that the product imported and the product sold were chemically and physically the same. They explained that the name “Castrol Radicool” was merely a marketing label and did not alter the nature or identity of the product, which remained “Long Life Coolant.”

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Customs cannot cancel or question MEIS Licenses Without Prior Action by DGFT: CESTAT

M/s. Aquapharm Chemical Limitedvs Commissioner of Customs (Port) CITATION : 2025 TAXSCAN (CESTAT) 778

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Customs authorities cannot cancel or question the validity of MEIS licenses unless the Directorate Generalof Foreign Trade (DGFT) first initiates and completes cancellation proceedings.

The tribunal explained that interpreting policy provisions, including determining the validity of incentive scrips, lies exclusively with DGFT. Customs overstepped its jurisdiction by acting before any DGFT action. The demand of Rs. 29.62 crore and associated penalties were accordingly set aside.

Service Tax Not Leviable on Notional Interest from Security Deposits for Locker Rentals: CESTAT

M/s. JYOTSNA VAULTS vsCOMMISSIONER OF CGST & CENTRAL EXCISE CITATION : 2025 TAXSCAN (CESTAT) 779

The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal (CESTAT) ruled that service tax could not be levied on notional interest from security deposits collected for locker rentals.

The present appeal related to the period April 2015 to March 2017. The department claimed that notional interest on security deposits received during property rental was taxable under “Banking and other Financial Services.” The Adjudicating Authority confirmed the demand of ₹6,10,238, stating it formed part of additional consideration. The Commissioner (Appeals) also rejected the assessee's appeal.

Excise Commissioner’s Order Not Restorable in Absence of Sufficient reason of Non Appearance: CESTAT

M/s. Siva Industries andHoldings Ltd. vs Commissioner of GST & Central Excise CITATION : 2025 TAXSCAN (CESTAT) 781

In a recent case, the Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that an excise commissioner's order is not restorable in the absence of a sufficient reason for non-appearance.

The tribunal ruled that the Rule provides that if the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when the appeal was called for hearing, can set aside the dismissal and restore the appeal. Hence, an opportunity for the appellant to restore the appeal and be heard on merits if sufficient cause is shown for his non-appearance, remains.

No Penalty Shall be Levied under Excise Act if Dept could not prove Allegation of Fraud to evade Duty: CESTAT

M/s Punjab Cold Treads vsCommissioner of Central Excise CITATION : 2025 TAXSCAN (CESTAT) 780

The Chandigarh bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that no penalty under the Excise Act, 1944, if the department cannot prove the allegation of fraud to evade duty.

The appellants requested the Department vide Letter dated 19.09.2006 to issue suitable clarification; the said letter was never replied. Meanwhile, the appellant received a letter dated 20.12.2012 asking them get themselves registered and to pay service tax in view of the clarification given by CBEC vide Circular dated 27.02.2012; the appellants immediately got themselves registered and started paying duty; the present proceedings were initiated for the period prior to 2012, invoking extended period.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Penalty u/s 112(a) and 114AA cannot be Imposed on Customs Broker as Revenue fails to Prove Direct Involvement in Wrong Doing: CESTAT

HIM Logistics Private Limited vsCommissioner of Customs : Respondent Export CITATION : 2025 TAXSCAN (CESTAT) 782

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Principal Bench, New Delhi has set aside penalties imposed under Section 112(a) and Section 114AA of the Customs Act, 1962 holding that the Revenue failed to prove any direct or intentional involvement of the customs broker in the alleged misdeclaration of imported goods.

The Customs Broker had already faced licence revocation proceedings under CBLR, which had been set aside earlier by the Tribunal, the Bench concluded that there was no valid ground to sustain separate penalties for the same facts.

Trust Recruiting Students by way of campus selection is liable to Service Tax under category of 'Manpower Recruitment or Supply Agency Service': CESTAT

M/s. T.A. Pai ManagementInstitute vs The Commissioner of Central Excise CITATION : 2025 TAXSCAN (CESTAT) 783

The Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that trusts recruiting students by way of campus selection are liable to the service tax category of 'Manpower Recruitment or Supply Agency Service'.

Since this activity was covered under ‘Manpower Recruitment or Supply Agency Services’ in terms of Section 65(68) of the Finance Act 1994 read with Section 65(105k) of the Finance Act 1994, hence, the notice was issued demanding service tax for the relevant period.

Service Tax Demand Cannot Be Based Solely on Form 26AS w/o Reconciliation: CESTAT

M/s Shri Sai Financial Servicesvs Commissioner, CGST & Central Excise CITATION : 2025 TAXSCAN (CESTAT) 784

The Allahabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a service tax demand cannot be sustained merely based on figures shown in Form 26AS without properly reconciling them with ST-3 returns and business records.

The appellant’s counsel argued before the Tribunal that the show cause notice was flawed from the beginning because the demand was computed using incorrect figures. They referred to Tribunal decisions including Kalyani Sharp India v. CCE, Pune and Safari Carrier v. CCE & CGST, Allahabad, asserting that demands raised without proper verification of records are not legally tenable.

Form DRC-03 Not Valid for Excise Pre-Deposit, Must Use CBIC Challan via ICEGATE or Authorized Bank: CESTAT

M/s Intercity Courier Servicesvs Commissioner of Central Excise & CGST CITATION : 2025 TAXSCAN (CESTAT) 785

The Allahabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that mandatory pre-deposit for filing an appeal under the Central Excise Act must be made through a challan generated on the CBIC portal and paid via ICEGATE or an authorized bank. Payment made using Form DRC-03 under the CGST regime is not valid for excise purposes.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The tribunal allowed the appeal and remanded the matter back to the Commissioner (Appeals) for a fresh decision on merits. The Commissioner (Appeals) was directed to pass a reasoned order within three months, following the principles of natural justice.

SCN Issued 3.5 Years After Voluntary Disclosure Without New Findings or Suppression: CESTAT quashes Extended Period Demand

M/s. Sungreen VentilationSystems vs Commissioner of GST and Central Excise CITATION : 2025 TAXSCAN (CESTAT) 786

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the extended period of limitation cannot be invoked when the assessee has voluntarily disclosed duty liability and there is no evidence of suppression or intent to evade tax.

The appellant argued that there was no fraud, suppression, or willful misstatement, and all duty had been paid along with interest well before issuance of the SCN. They also submitted that CENVAT credit should not be denied merely due to procedural lapses like delayed registration.

Extended Period Not Invocable when Department Previously Audited and Issued SCN: CESTAT

M/s Bridgeview Broadband NetworkPrivate Limited vs The Commissioner of Central Excise & Service Tax CITATION : 2025 TAXSCAN (CESTAT) 788

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the extended period of limitation could not be invoked when the department had already conducted an earlier audit and issued a show cause notice (SCN) covering a part of the same period.

They further argued that a previous audit had already led to an SCN in 2009 covering similar transactions for the overlapping period 2003-04 to 2007-08, and that the department did not raise these issues then. The appellant argued that it had a bona fide belief that service tax was not applicable on the services in question and that it had consistently filed ST-3 returns.

Credit Reversal Dispute Based on Interpretation, Not Suppression: CESTAT Denies Extended Period

M/s Pepsico India Holdings Pvt.Ltd. vs Commissioner of Central Goods & Service Tax CITATION : 2025 TAXSCAN (CESTAT) 787

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that a difference in interpretation of credit reversal provisions does not amount to suppression of facts and the extended period of limitation could not be invoked. The tribunal observed that the department had conducted regular audits and did not question the appellant’s reversal method at the relevant time. The tribunal also observed that the issue involved the interpretation of complex legal provisions and that the appellant’s approach could not be seen as deliberate evasion.

Excise Duty Mistakenly Paid on Alcohol-Based Homoeopathic Medicines Refundable Without Time Bar: CESTAT

The Allahabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that excise duty paid by mistake on alcohol-based homoeopathic medicines like tinctures and mother solutions is refundable, and such claims are not barred by the one-year time limit under Section 11B of the Central Excise Act. The single-member bench comprising P.K. Choudhary (Judicial Member) observed that since the goods were never liable to central excise duty, the payment could not be treated as duty under the Act. The refund claim, being one for rectifying a mistake of law, was not subject to the one-year limit.

Temporary Storage Outside Bonded Area is Not Unauthorized Removal: CESTAT Quashes Customs Confiscation and Penalty

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the temporary placement of goods outside a licensed bonded warehouse does not amount to unauthorized removal under the Customs Act. The tribunal ruled that the customs authorities acted in an overly rigid manner and failed to exercise responsible adjudication. Holding that the confiscation and penalty were unjustified, the tribunal allowed the appeal and set aside the order.

No Countervailing Duty on Areca Nut Processing Machines Imported for Pan Masala Production: CESTAT

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that countervailing duty (CVD) is not applicable on areca nut processing machines imported for the production of pan masala. Aggrieved by this, the appellant approached the CESTAT. The company's counsel argued that authorities cannot go beyond the scope of the show cause notice or revise classification without following the due process. They argued that the machines were specifically intended for processing areca nuts, which fall within the scope of CTH 84371000.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Relief for Vodafone Idea: CESTAT Allows CENVAT Credit on Police Booth Maintenance, Treats It as Brand Promotion

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) granted relief to Vodafone Idea Limited by allowing CENVAT credit on expenses incurred for maintaining a police booth, treating it as a form of brand promotion. The appellant's counsel argued that the police booth was constructed and maintained as part of the company’s broader brand visibility and public engagement initiatives. It helped build goodwill and provided indirect security benefits around the company's telecom installations.

Pre-Shipment Inspection Certificate not issued by DGFT-Approved Agency for Mauritius: CESTAT upholds Penalty

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a penalty was justified where the Pre-Shipment Inspection Certificate (PSIC) was not issued by a DGFT-approved agency for Mauritius and was found to be forged. The revenue’s representative argued that the inspection certificates appeared forged and misleading. It was pointed out that the inspection timings shown were not physically possible, and the certificates were issued by an inspector whose link to the issuing agency was unclear. They argued that producing a forged document before Customs constituted a serious violation, regardless of the final physical inspection result.

Exported Goods Misdeclared as “Natural Abrasive Grain” Instead of Restricted “Natural Garnet”: CESTAT upholds DGFT Policy Violation

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Tirupati Enterprises misdeclared restricted goods as general abrasives to circumvent export restrictions under DGFT policy and upheld the penalties imposed. The tribunal also observed that the appellant’s change in classification from 25132030 to 25132090 after the notification indicated an intent to circumvent the export restriction. It further held that reliance on internal communications not mentioned in the show cause notice did not alter the fact that the export violated DGFT policy.

Loose Sheets and Pocket Diary Not Sufficient to Prove Clandestine Clearance of Mild Steel Ingots: CESTAT

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that loose sheets and a pocket diary are not enough to prove clandestine removal of mild steel ingots without payment of duty. The counsel further argued that no shortage or excess of stock was found during the search, and there was no proof of unrecorded raw material purchases, transport of goods without documents, or extra electricity consumption. They pointed out that statements recorded during the investigation were not tested through cross-examination under Section 9D of the Central Excise Act, which made them legally invalid as evidence.

Wine Stock Discrepancies in Bonded Warehouse: CESTAT finds License Cancellation Too Harsh

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that cancellation of a bonded warehouse license was too harsh a penalty in a case involving discrepancies in wine stock, especially when no evidence of collusion or intent to evade duty was found. The appellant’s counsel argued that duty for the shortages had already been paid, part of it even before the first verification was conducted indicating there was no intent to evade. They further argued that the discrepancies were due to clerical mistakes by the CHA and that full duty had been paid on all the missing items, including 12 out of 50 cases of Jacob Creek and 10 cases of Cragganmore.

Splitting Invoices for Furniture and Building Rent Should Not Deny Legitimate Refund When Service Tax is Properly Paid: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that splitting invoices between furniture and building rent should not lead to denial of a refund when service tax has been properly paid under the category of “Renting of Immovable Property.” The tribunal explained that artificial splitting of charges should not be a reason to reject the refund if the service was used for authorized SEZ operations and tax was correctly paid.

Smuggling of 3kg Gold Concealed in Shoes via Airport Staff :CESTAT Reduces Penalty From ₹30L to ₹10L Citing Limited Role

The Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) reduces the penalty from ₹30 lakh to ₹10 lakh in a gold smuggling case involving 3 kg of gold concealed in shoes with the help of airport staff, citing the assessee’s limited role. Following investigation, a show cause notice was issued, and the Customs authority ordered absolute confiscation of the seized gold. A penalty of ₹30 lakh was imposed on the assessee under Sections 112(a) and 112(b) of the Customs Act. This penalty was later upheld by the Commissioner (Appeals) on 17.07.2019.

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