Delhi HC Dismisses CGST Appeal Over Duty-Free Retailer’s ₹11.73-Crore Refund, Says Taxability Issue Is For Supreme Court

DIAL licensed airport space to the respondent for duty-free shops in return for fixed fees and a share of revenue.

After the respondent’s challenge to service tax on the arrangement, the High Court held that the licence arrangement was not taxable as “airport services” under Section 65(105)(zzm) of the Finance Act, 1994, and the respondent was given liberty to seek a refund.

The respondent’s refund claim was rejected by the adjudicating authority, whose order considered the effect of Section 65(105)(zzzz), as retrospectively amended.

The Tribunal allowed the respondent’s appeal, and the Department appealed to the High Court under Section 35G of the Central Excise Act, 1944, raising questions concerning taxability.

Section 35G(1) of the Central Excise Act, 1944 permits an appeal to the High Court on a substantial question of law, except where the Tribunal’s order concerns, among other things, determination of a question relating to the rate of duty or value of goods for assessment.

Section 35L provides for appeals to the Supreme Court in specified matters, and Section 35L(2) expressly includes within “determination of any question having a relation to the rate of duty” the determination of taxability or excisability for assessment purposes.

Accordingly, a dispute involving such a determination falls outside the High Court’s appellate jurisdiction under Section 35G.

Although the appeal arose from a refund claim, the Department had defended the refund rejection on the ground that the services were taxable under Section 65(105)(zzzz), as amended, and had contested that issue before the Tribunal.

The appeal therefore raised a question of taxability, not merely a question concerning entitlement to a refund.

Because Section 35L(2) includes taxability for assessment purposes within the relevant category, the appeal was not maintainable before the High Court under Section 35G.

It disposed of the pending applications and left the Department at liberty to pursue any remedy available in law.