Does Delhi HC settle dust on apellate jurisdiction in service tax matters?

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Delhi HC, in the case of Ernst & Young Pvt. Ltd. and others [TS-50-HC-2014-ST] rejected Revenue appeals holding that questions pertaining to chargeability / taxability of service necessarily fall within the scope of ‘determination of tax rate’ question. HC thus held that in terms of Sec 35L of Central Excise Act r/w Sec 83 of Finance Act, such matters are maintainable before SC.
 
Delhi HC has thereby, given a wide and broad expanse to the appellate jurisdiction of SC in respect of questions relating to rate of tax / value for the purpose of assessment. 
 
Tax Experts express their views on the following points emerging therefrom: 

  1. Does the ruling effectively strip HCs’ jurisdiction to deal with substantial questions of law such as chargeability of service tax, thereby leaving them to consider questions pertaining to denial of stay, refund issues and simple penalty questions u/s 35G of Excise Act r/w Sec 83 of Finance Act?  
  2. Whether the ruling clarifies the jurisdiction of HC and SC, thereby mitigating the appeal jurisdiction disputes and on-going litigation?

Comments


Mr. Heetesh Veera
Partner, EY

As per Section 35G of the Central Excise Act, 1944, an appeal against the Customs Excise and Service Tax Appellate Tribunal’s (‘CESTAT’) order can be filed before the High Court (‘HC’). However, any CESTAT order relating to determination of any question having relation to rate of service tax or value of services can be appealed against (from a plain reading of the section) only before the Supreme Court (‘SC’) and not the HC.

Jurisdiction of High Courts to admit appeals against CESTAT orders in service tax cases has always been a subject matter of litigation. 

It appears that, with the above judgment, parties aggrieved by CESTAT orders on classification issues under service tax may be left with the only option to directly appeal before the Supreme Court.

It is also to be seen as to whether now the classification issues under service tax pending before various High Courts will be rejected and directed to the Supreme Court or will be disposed of by the High Courts.

Even under the Negative list regime, issues on chargeability of service tax such as whether activities fall in the negative list, mega exemption list, or qualify for an abatement scheme, etc could be referred to the SC and not to the HC.

Clarity on the above could be brought on the above ambiguity either by the Hon'ble Supreme Court or an amendment in the legislation.