High Court Criticizes GST Authority for Contesting Commissioner's Decision in SpiceJet Tax Dispute Regarding Services
In a significant ruling on December 5, 2024, the Supreme Court of India dismissed an appeal filed by the Central Goods and Services Tax (CGST) and Central Excise department, Delhi South, in a service tax dispute with SpiceJet.
The dispute originated from a show cause notice issued to SpiceJet on three issues in October 2014. The notice was centred around a CENVAT credit of ₹21.55 crore for July 2010-March 2011, service tax on excess baggage charges, and the invocation of the extended limitation period under Section 73(1) of the Finance Act, 1994.
After the Commissioner of Service Tax ruled in favour of SpiceJet in March 2016, the GST department took the unusual step of appealing against its own Commissioner's order. This action was met with criticism from the judiciary, as it was seen as improper and contrary to the principle of departmental consistency.
The Supreme Court's criticism stemmed from the anomaly of the department challenging an order issued by its own Commissioner, resulting in a violation of proper departmental procedure and consistency in tax administration. The Court's endorsement of the Commissioner's decision to drop the recovery signalled that the department's appeal was unjustified and unwarranted.
During the hearing, the Court questioned why the GST department was pursuing an appeal against an order passed by its own adjudicating authority. The GST department was represented by Senior Advocate Arjit Prasad, while SpiceJet was represented by Advocate V. Lakshmikumaran, with assistance from Ms. Umang Motiyani, Lakshmikumaran & Sridharan attorneys.
The appeal was dismissed as not maintainable, as any appeal from the CESTAT order lies directly to the Supreme Court under Section 35L. A Division Bench of Justices Prathiba M Singh and Amit Sharma dismissed the GST department's appeal in the SpiceJet service tax dispute. The ruling was reported by @thyagarajan_law.
Interestingly, the High Court clarified that the dismissal would not prevent the GST authority from approaching the Supreme Court and seeking exclusion of the time spent in the High Court under Section 14 of the Limitation Act, 1963. The Bench of Justices JB Pardiwala and RMahadevan presided over the dismissal of the appeal.
The Supreme Court's ruling dismissed the department's appeal in its entirety, upholding the Commissioner's substantive findings and dismissing the show cause notice as time-barred, as previously decided by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on July 3, 2023. This case highlights the judiciary's stance against self-contradictory actions by tax authorities that undermine efficient and fair tax enforcement.
The dismissal of the GST department's appeal by the Supreme Court could potentially impact the banking-and-insurance sector and other businesses, as it sets a precedent for departmental consistency in finance. Despite the High Court's clarification that the GST authority can approach the Supreme Court for exclusion of time spent in the High Court, the industry could be cautious about similar expenditures on disputes with the government in the future.
