In a rare rebuke, the Supreme Court Today (Aug 11) dismissed a GST department appeal against an order passed by its own Commissioner in a service tax case involving SpiceJet. The Bench questioned why the department was fighting a decision it had itself issued and upheld at every stage.
Thank you for reading this post, don't forget to subscribe!
NEW DELHI: The Supreme Court on Monday strongly criticised the Central Goods and Services Tax (CGST) and Central Excise Department, Delhi South, for filing an appeal against an order that was actually passed by its own Commissioner and had been upheld at every stage of the legal process.
The case was heard by a Bench of Justices JB Pardiwala and R Mahadevan.
The appeal was related to a long-standing service tax dispute between the department and airline company SpiceJet. The Supreme Court did not just reject the appeal—it also expressed surprise at the department’s decision to even bring the matter before the Court.
“How can you file an appeal against your own commissioner’s order? The CESTAT has also dismissed your appeal. Dismissed,”
-the Court remarked while throwing out the petition.
Background of the Dispute
The entire case started with a show cause notice issued to SpiceJet on October 21, 2014. The notice questioned the airline on three major points:
- Whether SpiceJet had wrongly claimed CENVAT credit worth Rs 21.55 crore for the period between July 2010 and March 2011, allegedly violating Rule 6(3A) of the CENVAT Credit Rules, 2004.
- Whether service tax of Rs 4.01 crore should be charged on excess baggage fees collected from passengers.
- Whether the department could use the extended limitation period under Section 73(1) of the Finance Act, 1994 to accuse the airline of suppressing facts and start legal action.
On March 31, 2016, the Commissioner of Service Tax decided in favour of SpiceJet. The Commissioner’s order said that:
- The demand for reversal of CENVAT credit was not justified.
- No extra service tax was payable on excess baggage charges.
- The extended time limit for taking legal action could not be applied in this case.
Appeals and Dismissals at Every Stage
The department did not agree with the Commissioner’s order and appealed to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). On July 3, 2023, CESTAT dismissed the appeal, calling the show cause notice “time-barred” and confirming the Commissioner’s main findings.
After that, the Commissioner approached the Delhi High Court under Section 35G of the Central Excise Act, 1944, framing the dispute as a question of limitation (time limit).
However, on December 5, 2024, a Division Bench of Justices Prathiba M Singh and Amit Sharma of the Delhi High Court dismissed the appeal as not maintainable.
The High Court explained that since the Commissioner’s original order also dealt with taxability and valuation issues, any appeal against the CESTAT decision should go directly to the Supreme Court under Section 35L.
The High Court also clarified that the GST department could still approach the Supreme Court and seek an exclusion of the time spent in the High Court under Section 14 of the Limitation Act, 1963.
The Final Supreme Court Hearing
Following the High Court’s suggestion, the GST department filed an appeal before the Supreme Court. But here too, the case met the same fate—it was dismissed.
The top court questioned why the CGST department was challenging an order issued by its own adjudicating authority, especially when it had already been supported by CESTAT and the Delhi High Court.
The CGST department was represented in the Supreme Court by Senior Advocate Arjit Prasad.
SpiceJet was represented by Advocate Charanya Lakshmikumaran from Lakshmikumaran & Sridharan law firm.
CASE TITLE:
Commissioner CGST v. SpiceJet
Would You Like Assistance In Drafting A Legal Notice Or Complaint?
CLICK HERE
Click Here to Read Our Reports on CJI BR Gavai
Click Here to Read Our Reports on SpiceJet
FOLLOW US ON YOUTUBE FOR MORE LEGAL UPDATES
