NON MAINTAINABILITY OF APPEAL TO HIGH COURT AGAINST THE ORDER OF CESTAT.

[Mr. M. GOVINDARAJAN]

                        Sec.35G of Central Excise Act, 1944 provides for filing appeal to High Court against the order of CESTAT.  According to this Section an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after 01.07.2003 if the High Court is satisfied that the case involves a substantial question of law.  If there is no question of law involved then the High Court will dismiss the appeal.  But appeal against the order of CESTAT which is an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment.  Such appeals are to be filed to Supreme Court directly.   Section 35L(b) provides that an appeal shall lie to Supreme Court from any order passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment.  The Karnataka High Court affirmed the same in the following case laws:

                        In ‘Commissioner of Service Tax, Bangalore V. Siddarth Polymers’ – 2011 (23) STR 209 (Kar) the Revenue preferred appeals against order passed by Tribunal holding that the finding of the Commissioner of Appeals that the activities relied on by the assessees as consignment agents do not fall within the category of clearing and forwarding agent.  The question that arose for consideration of the High Court in the present appeal is whether the activities carried on by the assessees fall within the category of consignment agent or clearing and forwarding agent or Business Auxiliary Services.   The High Court held that the said question falls squarely within the exception carved out in Section 35G, ‘not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment’, and the High Court has no jurisdiction to adjudicate the said issue.   The High Court further held that the appeal lies to the Supreme Court under Section 35L which alone has exclusive jurisdiction to decide the said question.

                        In ‘Commissioner of Central Excise, Mangalore V. Rai & Associates’ – 2011 (23) STR 210 (Kar) the Revenue filed these appeals challenging the order of the Appellate Tribunal which held that the impugned activity carried on by the Chartered Accountants do not fall within the definition of Section 2(2) of the Chartered Accountants Act and therefore, they are not liable to pay any service tax in terms of the show cause notice. The lower authorities, in this case, held that the relationship between the assessee and M/s MESCOM is not that of practicing Chartered Accountants and a client but that of an agent and his principal.   The service provided does not fit fall under Section 65(105)(s).   The contract is for outsourcing the work of ledger maintenance and billing and not for hiring a Chartered Accountant for his specialized professional skills of accounting which involved application of principles and procedures of accounting which cannot be dispensed with on account of computerization of ledgers and which cannot be attended by persons other than a Chartered Accountant.   The services were neither offered nor provided as a professional service of accounting attracting service tax liability in terms of Notification No. 59/1998-ST by attracting classification under category of services provided by a Chartered Accountant.  Therefore the First Appellate Authority set aside the order confirming the liability of  service tax under Practising Chartered Accountant services.   The Revenue filed appeal against the order of the First Appellate Authority before the Tribunal who in turn dismissed the appeal filed by the Revenue.   In its order the Tribunal held that the activity of outsourcing meter reading, billing and ledger posting which was an activity to be done by the respective companies does not fall within the ambit of the professional activity of Chartered Accountant.  The employees of the companies were not getting trained as Chartered Accountants and they were unskilled persons without qualifications and were only doing manual work.   Further the employees were covered under various labor legislations.  Therefore it upheld the order of the First Appellate Authority. 

                        The Revenue filed the present appeal against the order of the Tribunal before the High Court.  The question that arose for consideration by the Court is whether the impugned activity constitutes service and liable to service tax and if so whether it falls within the category of Chartered Accountant or Business Auxiliary Services or in other words the dispute relates to rate of duty and classification.   The High Court held that the said question falls squarely within the exception carved out in Section 35G and the High Court has no jurisdiction to adjudicate the said issue and the Apex court under 35L has alone exclusive jurisdiction to decide the said question.

                        In ‘Commissioner of Service Tax, Bangalore V. Prakash Air Freight Private Limited’ – 2011 (23) STR 220 (Kar) the assessee was providing taxable service under the category of ‘Courier Agency’.  International consignments were exempted from the period 15.3.2005 to 15.6.2005 under Rule 4 of Export of Services Rules, 2005.   The assessee was, therefore, not liable to pay tax for the said period.   However the Commissioner held that the assessee is in India and the service receiver who hands over the consignment are also in India and therefore it does not constitute export of service and therefore he confirmed the demand along with interest and penalty.  The Tribunal, in appeal, held that during the relevant period the services rendered by the assessee should be deemed to have been derived outside India and therefore it will not liable for payment of service tax and set aside the original order.  Against this order the Revenue filed appeal before the High Court.  The principal question of law that arose for consideration in this appeal by the High Court is that whether the assessee is liable to pay service tax for a courier service during the period from 15.3.05 to 15.6.05 as the service provided by the assessee constitutes export of service.   The High Court held that this appeal was filed against the order under Section 35G.   The said section made it clear that an appeal shall lie to the High Court from every order not being an order, relating to among other things, to the determination of any question having a relation to the rate of duty on excise or to the value of goods for the purpose of assessment.   The High Court further held that the case falls squarely within the phrase ‘determination of any question relating to rate of service tax’ and it is the Supreme Court along which has exclusive jurisdiction to decide the said question under Section 35L of the Act.  Therefore the appeal is not maintainable. 

                        In cases similar to the above case laws appeal could not be filed before the High Court since the same is not maintainable before High Court and the appeal may be filed to Supreme Court under Section 35L of the Central Excise Act.