Half-Yearly Customs, Excise and Service Tax Case Digest: CESTAT Decisions 2025 [Part VIII]

This half-yearly round-up analytically summarizes the key Indirect Tax-Customs, Excise and Service Tax rulings of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) reported at Taxscan.in during the first half of 2025.

Accrued CENVAT Credit is a Statutory Right and cannot be denied without Clear Legal Provision: CESTAT

Shri India Cotton Mills Pvt. Ltd. vs Commissioner of GST & Central Excise CITATION: 2025 TAXSCAN (CESTAT) 597

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that CENVAT credit, once validly availed, is a statutory right and cannot be retrospectively taken away unless explicitly provided by law.

The tribunal ruled that the amended Rule 11(3) cannot operate retrospectively to deny credit earned before its insertion. It held that the revenue’s attempt to apply the rule to past credits was legally unsustainable and violative of the principle that vested rights cannot be taken away without explicit legislative intent.

ERP Services to Overseas Client Held Export: CESTAT Quashes Service Tax Demand on Limitation Grounds

M/s. South Nests Software Solutions Pvt. Ltd vs Commissioner of GST and Central Excise CITATION: 2025 TAXSCAN (CESTAT) 603

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the service tax demand raised on ERP development services provided to a foreign entity was not maintainable as the entire demand was barred by limitation.

The tribunal explained that when facts are already disclosed in official filings, the longer five-year limitation period cannot be applied without clear evidence of intent to evade tax. Since the show cause notice was issued beyond the normal 30-month period from the date of filing the last return, the entire demand was time-barred.

100% EOU Can Carry Forward Accumulated CENVAT Credit Upon De-bonding to DTA Unit: CESTAT

M/s. Stanadyne India (P) Ltd vs Commissioner of GST & Central Excise CITATION : 2025 TAXSCAN (CESTAT) 607

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a 100% Export Oriented Unit (EOU) is entitled to carry forward accumulated CENVAT credit upon de-bonding and conversion into a Domestic Tariff Area (DTA) unit, subject to verification of facts. The tribunal set aside the order passed by the Commissioner (Appeals) and remanded the matter back to the original authority. The adjudicating authority was directed to verify the relevant facts and decide the issue in line with the High Court’s ruling. The appeal was disposed of accordingly.

Overseas Services by Tech Mahindra’s Subsidiaries are Not Taxable in India: CESTAT denies Refund on CENVAT & Service Tax Paid

Tech Mahindra Ltd. vs Commissioner of Service Tax-I CITATION : 2025 TAXSCAN (CESTAT) 613

The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) recently dismissed all 12 appeals filed by Tech Mahindra, rejecting its claim for refund of accumulated Central Value Added Tax (CENVAT) credit and service tax. It further appreciated the revenue’s argument that the services in question were performed independently by the subsidiaries without the involvement of the appellant company, hence failing to qualify for input tax under Rule 2(l) of the Cenvat Credit Rules , 2004, further substantiating the denial of refund claims.

‘Service Tax cannot be levied when there is no flow of Consideration’: CESTAT sets aside Rs. 31.5 lakhs demand on Corporate Guarantee

M/s. Wellworth Project Developers Private Limited vs Commissioner ofCGST CITATION : 2025 TAXSCAN (CESTAT) 611

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that service tax cannot be levied when there is no flow of consideration and set aside Rs. 31.5 lakh demand on corporate guarantee. One of the issues in this case was in relation to the demand of service tax on corporate guarantees for the financial year 2017-18. An amount of Rs 31.5 lakhs was demanded towards corporate guarantees for the financial year 2017-18.

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Leasing of Oxygen Plant Equipment by Praxair India Not a Financial Lease, Not Taxable as Financial Service: CESTAT

Praxair India Private Limited vs The Commissioner of Central Excise& Service Tax CITATION : 2025 TAXSCAN (CESTAT) 617

The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), Bangalore, has held that the activity of leasing oxygen plant equipment by Praxair India Pvt. Ltd. does not amount to a "financial lease" and thus cannot be taxed under the category of "Banking and Other Financial Services." Further, the bench of P A Augustian (Judicial member) and R. Bhagya Devi (Technical member) noted that in Praxair's own earlier case decided in 2018, a similar issue was adjudicated in its favour, where it was conclusively held that the equipment leasing arrangement was an operating lease and did not fall under financial leasing services. The earlier decision, having attained finality, was binding on the current case as well.

Relief for Patna Municipal Corporation: CESTAT Rules Licensing Fee for Mobile Towers Not Taxable as 'Renting of Immovable Property'

M/s. Patna Municipal Corporation vs Commissioner of Central Excise and Service Tax CITATION : 2025 TAXSCAN (CESTAT) 618

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that licensing fees collected by the Patna Municipal Corporation for mobile towers cannot be classified as “renting of immovable property” and are not liable to service tax.

The tribunal found merit in the appellant's argument that licensing fees collected for mobile towers were not periodic rent but permission fees and thus did not fall within the scope of “renting of immovable property.” The tribunal also ruled that ISBT parking charges did not constitute rent and should not attract service tax.

Relief for Patna Municipal Corporation: CESTAT Rules Licensing Fee for Mobile Towers Not Taxable as 'Renting of Immovable Property'

M/s. Patna Municipal Corporation vs Commissioner of Central Excise and Service Tax CITATION : 2025 TAXSCAN (CESTAT) 618

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that licensing fees collected by the Patna Municipal Corporation for mobile towers cannot be classified as “renting of immovable property” and are not liable to service tax. The tribunal found that the department had not clearly defined the basis for one of the miscellaneous rent demands and set it aside. It also held that since the appellant had disclosed all transactions in its books and there was no intent to evade tax, the extended limitation period and associated penalties under Sections 78, 77(1)(a), and 77(1)(c) could not be invoked. However, the late fee for delay in filing service tax returns was upheld.

Delay Payment Charges Not Taxable as Declared Service Under Section 66E(e): CESTAT

M/S BALAJEE LOHA LTD vs COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX-RAIPUR CITATION : 2025 TAXSCAN (CESTAT) 620

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that delay payment charges are not taxable as a declared service under Section 66E(e) of the Finance Act, 1994. One of the demands imposed was with respect to the amounts received on account of delayed payments. The appellant received the above-mentioned amount when its buyers delayed payments. Revenue demanded service tax on these amounts under section 66E(e) of the Finance Act as ‘agreeing to refrain from an act or to tolerate an act’ which is a declared service.

Service Tax on Transit Insurance Unsustainable When Already Included in Excise Duty: CESTAT

M/S BALAJEE LOHA LTD vs COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX-RAIPUR CITATION : 2025 TAXSCAN (CESTAT) 620

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that service tax on transit insurance was unsustainable when already included in excise duty. The appellant explained that it sold goods on a FOR basis, meaning delivery was up to the buyer’s premises, and had already paid Central Excise duty on the total amount, including insurance, and thus submitted that the same amount shouldn’t be taxed again as a service.

Weigh bridge Facility Not a Business Support Service: CESTAT Quashes Service Tax Demand

M/S BALAJEE LOHA LTD vs COMMISSIONER OF CENTRAL EXCISE AND SERVICETAX-RAIPUR CITATION : 2025 TAXSCAN (CESTAT) 620

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in a recent decision held that providing a weigh bridge does not amount to providing business support services and quashed the service tax demand. A show cause notice (SCN) dated 30-8-2016 was issued to the assessee by invoking the extended period of limitation under the proviso to section 73(1) of the Finance Act, demanding service tax with interest and proposing the imposition of penalties.

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No Service Tax on Hostel Fees Received for Non-Residential Courses in Coaching Institute: CESTAT

M/s. Roy’s Institute of Competitive Examination Private Limited vsPrincipal Commissioner of Service Tax-I CITATION : 2025 TAXSCAN (CESTAT) 621

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that service tax is not applicable to dormitory fees paid for courses at non-residential coaching institutes. The two-member bench consisting of Ashok Jindal, a judicial member, and K. Anpazhakan, a technical member, has noted that "the stand-alone hostel charges collected for non-residential courses, have no connection with Commercial Training and Coaching services as defined under section 65(105)(zzc) of the Finance Act, in that even if any student, who do not avail themselves of this service, would continue to avail themselves of the course offered by the assessee and there is no question of service taxpayment."

Failure to File Claim with Liquidator Renders Appeal Infructuous: CESTAT Reaffirms Finality of IBC Resolution Plan

M/s. Veesons Energy Systems Pvt. Ltd. vs Commissioner of GST and Central Excise CITATION : 2025 TAXSCAN (CESTAT) 622

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) recently observed that an appeal would stand abated, holding that the service tax appeal was infructuous due to the tax department’s failure to file its claim with the liquidator during the liquidation process as per the Insolvency and Bankruptcy Code, 2016 (IBC).

Further, stating Rule 22 of the CESTAT (Procedure) Rules, 1982, the tribunal observed that once a company is being wound up, the appeal or application shall abate, unless an application is made for continuance of such proceedings by or against the liquidator or other legal representative within sixty days of the liquidation order.

Service Tax Demand not Part of Approved Resolution Plan fails w/o a Continuance Application: CESTAT

M/s. Veesons Energy Systems Pvt. Ltd. vs Commissioner of GST and Central Excise CITATION : 2025 TAXSCAN (CESTAT) 622

The Chennai Bench of the Customs, Excise And Service Tax Appellate Tribunal (CESTAT) recently reaffirmed the abatement of an appeal based on a service tax demand raised after approval of the resolution plan. The liquidator admitted claims from the tax department, but the specific demand in question in the present appeal was not submitted as a claim and therefore was not admitted. Consequently, no application for continuance of the appeal was made by the liquidator under Rule 22 of the CESTAT (Procedure) Rules, 1982.

Construction Involving Common Areas Still a Composite Works Contract, Not Residential Complex Service: CESTAT

M/s. Orchid Homes vs Commissioner of GST & Central Excise CITATION : 2025 TAXSCAN (CESTAT) 624

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that construction services involving common areas such as parking spaces do not change the nature of a composite contract into a taxable "Residential Complex Service" under service tax law. They relied on the Supreme Court's ruling in Larsen & Toubro Ltd., arguing that such composite contracts were not liable for service tax under "Residential Complex Service" before June 1, 2007, and could only be taxed under "Works Contract Service" thereafter. They also argued that since the case involved legal interpretation, the extended period of limitation could not be invoked.

CESTAT Upholds Penalty for Misdeclaration and Undervaluation in Import of Glass Chatons, against Importer and Alleged Mastermind

Shri S. Iqbal vs The Commissioner of Customs (Air) CITATION : 2025 TAXSCAN (CESTAT) 630

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) dismissed the appeals filed by the assessee, S. Iqbal, and G. James, upholding the penalties imposed on them by the adjudicating authority in connection with a smuggling attempt involving imitation stones.

The DRI's examination revealed a carefully crafted scheme involving multiple players. Iqbal, according to the statements recorded, allegedly set up the import framework using benami traders and dummy firms. He reportedly made payments for port charges and logistical activities. James, acting as the face of the operation, facilitated documentation and customs filing. Upon interception of the consignment and seizure on 6th October 2010, both James and Iqbal were summoned for questioning. While James confessed to being a front, Iqbal also allegedly admitted the involvement of several other individuals across cities in coordinating the undervaluation and misdeclaration.

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Notional Interest on Security Deposits for Locker Rentals Not Taxable as Service Value: CESTAT

M/s. Ratna Sagar Safe Deposit Vaults Pvt. Ltd. vs Commissioner of CGST& Central Excise CITATION : 2025 TAXSCAN (CESTAT) 637

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that notional interest on interest-free security deposits collected for locker rentals cannot be added to the value of taxable services and is not subject to service tax.

The appellant’s counsel argued that a similar issue had already been decided in its favour by the Tribunal for the previous period from April 2006 to March 2012. They submitted that under Section 67 of the Finance Act, 1994, only the actual amount received as consideration for a service can be taxed.

CESTAT: License Fee in Brewery Contract Not Taxable as Part of Immovable Property Rent

Tripti Alcobrew Private Limited vs Commissioner of Central ExciseCustoms CITATION : 2025 TAXSCAN (CESTAT) 635

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that consideration received under a license agreement for the transfer of a brewery license cannot be clubbed with lease rent and taxed as part of “renting of immovable property” service.

This, they claimed, amounted to a transfer of the right to use goods under Article 366(29A)(d) of the Constitution and thus qualified as a deemed sale, which falls outside the scope of service tax. They relied on the Tribunal’s earlier ruling in their own case for the previous period, where the same issue had been decided in their favour.

Fabric Rolls Missing from Taxpayer’s Custody After Legal Seizure: CESTAT Upholds Redemption Fine

COMMISSIONER OF CUSTOMS (PREVENTIVE) vs M/S AKAY CONES PVT. LTD. CITATION : 2025 TAXSCAN (CESTAT) 634

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that goods seized by customs authorities but later found missing from the taxpayer’s custody remain liable for confiscation, and a redemption fine can still be imposed.

The Commissioner of Customs confirmed the differential customs duty and confiscated the 683 rolls found during inspection. The Commissioner declined to confiscate the missing goods and did not impose any redemption fine on them, reasoning that since the goods were not physically available at the time of adjudication, confiscation was not possible.

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€1 Million Cancelled Invoice for Post-Contract Services Not Dutiable as Additional Consideration for Imports: CESTAT

M/s Edag Technologies India Pvt. Ltd vs Commissioner of Customs CITATION : 2025 TAXSCAN (CESTAT) 636

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that an unpaid and later cancelled €1 million invoice issued for post-contract services cannot be treated as additional consideration for imported goods and therefore does not attract customs duty.

The Directorate of Revenue Intelligence (DRI) alleged that this provision represented additional consideration linked to the imported goods and should have been included in the customs valuation. The department issued a show cause notice seeking to reject the declared value under Rule 10A of the Customs Valuation Rules and revalue it under Rule 8. It also proposed confiscation of goods and penalties under Sections 111(m), 112, and 114A of the Customs Act, 1962

Service Tax under RCM not Leviable on Bank Charges Paid to Foreign Banks: CESTAT

M/s. Cargotec India Pvt. Ltd vs Commissioner of GST & Central Excise CITATION : 2025 TAXSCAN (CESTAT) 647

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that bank charges paid to foreign banks are not liable to service tax under the reverse charge mechanism.

The buyer received the artwork charges overseas, and he charges the assessee the specified amount. The assessee paid this in accordance with the terms and conditions of the transaction, and there is no proof that he was the one who received the design charges. Accordingly, the Tribunal declared that the assessee is not required to pay any service tax on such artwork charges or design and development payments.

Intention Must be Proven for Imposing Penalty u/s 114AA of Customs Act for Obtaining Undue Export Advantage: CESTAT

Evergreen Shippng Agency India Pvt Ltd. vs Commissioner of Customs(Export) CITATION : 2025 TAXSCAN (CESTAT) 639

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that knowledge and intention must be there to impose penalty under Section 114AA of Customs Act.

The container was booked to export the goods to Colon Free Zone, Panama and the same was mentioned in the Shipping Bill as well. It is a fact that there were no fraudulent amendments in the five Shipping Bills pertaining to goods carried by the assessee, observed the Tribunal.

No Service Tax on Commission Deducted by Foreign Buyers in Export Transactions Lacking Agent Relationship: CESTAT

Akshita Exports vs Commissioner of C.E. & S.T.-Surat-i CITATION : 2025 TAXSCAN (CESTAT) 642

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that service tax is not payable on commission amounts deducted by foreign buyers in export transactions when there is no agent relationship between the exporter and a foreign service provider.

The revenue counsel argued that the appellant benefited from sales promotion services provided by agents abroad and that commission was essential to securing export orders. They emphasized that the director of the appellant firm admitted that export orders were obtained only after paying such commission, so a service was received.

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Co-Noticees Cannot Be Penalized Independently Once Main Noticee Settles Dispute Under SVLDRS Scheme: CESTAT

Shri Rajnesh Kumar Jain vs Commissioner of CGST & Central Excise CITATION : 2025 TAXSCAN (CESTAT) 640

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that co-noticees cannot be penalized independently once the main noticee settles the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS), 2019.

In support of this argument, the appellant relied on decisions of the Tribunal in cases such as JPFL Films Pvt. Ltd. v. CCE, Ludhiana, Ekam International v. CCE, Ludhiana, and Auto Ignition Ltd. v. CCE, Delhi-IV, where it was consistently held that no separate penalty is sustainable against co-noticees after settlement by the principal noticee.

Excise Dept Fails to Probe 90 of 160 Transactions, Vendor Not Made Co-Noticee: CESTAT Upholds Cenvat Credit Claim

M/s. OM Shakti Smelters Pvt. Ltd. vs Commissioner of Central Excise CITATION : 2025 TAXSCAN (CESTAT) 641

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Cenvat credit cannot be denied based solely on assumptions and an incomplete investigation by the department.

The tribunal held that the appellant had produced valid documentation, paid through proper channels, and complied with all procedural requirements. It also observed that no alternative source of raw material had been established by the department, nor was any evidence of suppression presented to justify invoking the extended period for demand.

Penalty on CHA for Not Verifying Export Credentials: CESTAT Sets Aside Penalty, Says CHALR Rules Apply

Shri E. Joseph John vs Commissioner of Customs CITATION : 2025 TAXSCAN (CESTAT) 644

The Chennai Bench of Customs,Excise and Service Tax Appellate Tribunal ( CESTAT ) set aside penalties imposed on a Custom House Agent employee, holding that procedural lapses such as failing to verify exporter credentials fall under the Customs House Agents Licensing Regulations (CHALR), 2004 and not the Customs Act.

The appellate tribunal noted that although the assessee received unusually high fees, there was no evidence of collusion or illegal gain. It held that suspicion or negligence alone was not enough to impose penalties under Section 114 of the Customs Act, as there was no act that made the goods liable for confiscation.

Registration of Premises Not Mandatory to Claim Refund of Unutilized CENVAT Credit on Input Services: CESTAT

M/s. Cargotec India Pvt. Ltd. bs Commissioner of GST & CentralExcise CITATION : 2025 TAXSCAN (CESTAT) 645

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that registration of premises is not mandatory to claim a refund of unutilized CENVAT credit on input services.

The CESTAT found the original order unclear and wrong to reject the claim just because the service tax credit came from unregistered premises. It noted the assessee was registered properly and had maintained records. Since the assessee cooperated by providing data, the tribunal set aside the rejection.

Incorrect Fabric Label on Reimported Goods: CESTAT Finds No Misdeclaration as Composition Remains Same and Customs Duty Drawback Is Returned

M/s.PGC Corporation Limited vs The Commissioner of Customs CITATION : 2025 TAXSCAN (CESTAT) 643

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) found no misdeclaration in the case of incorrect fabric labels on reimported goods, as the actual fabric composition remained the same and the customs duty drawback was returned.

The assessee explained the transaction and the understanding with the foreign buyer, but the original authority held that there was misdeclaration and confirmed the demand. The First Appellate Authority upheld the order through Order-in-Appeal No. 80/2014 dated 20.08.2014. The appellant challenged this order before the tribunal.

Self-Certification by Exporter or CA Enough to Prove Nexus for Refund on Export Services: CESTAT

M/s. Cargotec India Pvt. Ltd vs Commissioner of GST & Central Excise CITATION : 2025 TAXSCAN (CESTAT) 647

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that self-certification by the exporter or a Chartered Accountant (CA)is sufficient to establish the nexus between input services and export services for claiming refund of unutilized CENVAT credit.

It found that the original orders were cryptic and failed to explain why the input services could not be correlated with the output services. The Commissioner (Appeals) attempted to support the original orders by discussing legal provisions but did not examine the factual usage of input services. Citing these deficiencies and the relevant circular and case law, the CESTAT set aside the impugned order and allowed the appeal.

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No Service Tax Payable on Foreign Bank Charges as No Direct Service Rendered to Exporter: CESTAT

M/s. Cotton Blossom India (P) Ltd vs Commissioner of GST CITATION : 2025 TAXSCAN (CESTAT) 646

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that no service tax was payable on foreign bank charges deducted from export remittances, as no direct service was rendered to the exporter.

The appellate tribunal carefully considered a recent order from the Chennai Bench of CESTAT in a similar case involving export-related service tax issues. That order reviewed various judicial rulings and found that the demand for service tax on charges deducted by foreign banks was not valid because the conditions for banking and financial services were not met.

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