Delhi HC Dismisses Service-Tax Appeals Against Travel Agents Below ₹2 Crore, Says Recurring Disputes Are No Exception to Appeal Limit

In brief

The question

1. Whether the Department’s appeals, involving amounts below the prescribed monetary limit, were maintainable on the ground that the issues had cascading effects or were recurring in nature

The court held

The Court held that the appeals were not maintainable because the amounts involved were below the ₹2 crore High Court threshold and none of the applicable exceptions was established.

It also directed

It dismissed the appeals as not maintainable, kept the proposed substantial questions of law open, and disposed of all pending applications.

01Facts

The Department filed appeals under Section 35G of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994, against the CESTAT’s order dated 25 September 2024 setting aside service-tax demands against the respondents, including travel-agent companies.

¶ 1–3

The Department accepted that the amount involved in the appeals was below the applicable ₹2 crore monetary limit for appeals before the High Court, but argued that the appeals should proceed because the issues had cascading effects and were recurring in nature.

¶ 5

The respondents objected that the appeals were barred by the CBEC instructions dated 6 August 2024.

¶ 4

02Issues

i.1. Whether the Department’s appeals, involving amounts below the prescribed monetary limit, were maintainable on the ground that the issues had cascading effects or were recurring in nature

¶ 4–5, 12–18

ii.2. Whether the appeals fell within an exception to the monetary limits prescribed by the CBEC instructions

¶ 7–12, 18, 21

03Law Applied

Section 35G of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994, provides for appeals to the High Court, subject to applicable CBEC instructions prescribing monetary limits.

¶ 1

The Court construed the CBEC instructions, including those dated 17 August 2011 and 6 August 2024, as prescribing a ₹2 crore threshold for High Court appeals, with exceptions for a challenge to the constitutional validity of a provision of an Act or Rule, or a challenge to a notification, instruction, order or circular that has been held illegal or ultra vires.

¶ 7–12, 18

The Court held that Commissioner of Income Tax v. Surya Herbal Limited, (2011) 15 SCC 482, did not decide that a cascading effect displaces a monetary-limit circular; it merely permitted the Department to approach the High Court to raise that point.

¶ 13

It also noted that the 2015 instruction concerning recurring issues had been withdrawn by the instruction dated 3 April 2018.

¶ 9–10, 17

Provisions in the judgment · 1 · Linked ones open on LawLens

Central Excise Act, 1944 Section 35

04Reasoning

The appeals did not challenge the constitutional validity of any Act or Rule, nor any notification, instruction, order or circular held illegal or ultra vires; accordingly, neither prescribed exception applied.

¶ 12, 18, 21

The Court rejected the Department’s reliance on cascading effects, finding that Surya Herbal had not established such an exception.

¶ 13

It also declined to follow the contrary approach of the Gauhati High Court in Central Goods and Service Tax v. M/s Pan Parag India Limited, noting that the relevant instructions did not create an exception for cascading effects or bunch matters.

¶ 14–15

The Department’s recurring-issue argument likewise failed because the 2015 instruction it relied on had been withdrawn in 2018.

¶ 16–17

05Holding

The Court held that the appeals were not maintainable because the amounts involved were below the ₹2 crore High Court threshold and none of the applicable exceptions was established.

¶ 18, 21

It dismissed the appeals as not maintainable, kept the proposed substantial questions of law open, and disposed of all pending applications.

¶ 21

LawLens.Delhi High Court

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