The Commissioner Of Central Tax And Customs vs. Ws Zoom Technologies (INDIA) PVT LTD
Original PDF →No AI summary yet for this judgment.
Cause title — parties, addresses and appearances
The Court delivered the following: JUDGMENT
IN THE IIIGH COURT.FOR TTIE STATE OF TELANGANA AT TIYDERABAD THE HONOURABLE SRI JUSTICE P.SAM KOSHY rHE HoNouRABLE T*T,^r,.u NARSTNG RAo NANDIKONDA Between: 20'04'2026 Il.:9",.1':.:oner of Cenrra t Tax &Cusroms, irrJ::i:..d csr Com m iss ionerare, i,?.',ltiXT*ii;; fl,' h% B6il C.E.ANo.I0 OF 2026 AND ...Appellant Y; :;:,!;';:;;,icj:;,, "oia) Pv., L,d, 'lr;;;;;, r:,:1: t'vo t z' Banjara Hi I rs' ...Respondent JUDGMENT: (per Hon ble Sri Justice p.Sam Koshy) Heard Mr. Vr3hay K. punna, Iearned Senior Standing Counsel for the CBIC lor the appellant and Mr.Narendra Dave, learned counsel representing M/s Lakshmi Kumaran & Sridharan for the respondent. perused the record.
The challenge in the present central excise appeal under Section 35G olthe Central Excise Act, 1944 is to the order passed
z by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hvderabad dated I 1'09'2025'
The contention of the learned counsel lor the appellant is thatthenatureo[transactioninvolvedistherighttouse informationtechnotogysoftwareforcommercialexploitationand such transactions fall within the definition of Information Technology Software Service (ITSS) under Section 65(105) (zzzze) ofthe Finance Acq 1994'
The question of law which the leamed counsel for the appellant is trying to raise is whether the nature of transaction carried out by the respondent would amount to a sale of goods or a service rendered under the Finance Act, 1994 under the aforesaidsection.ltwouldberelevant,atthisjuncture,totake note of the relevant section i.e., Section 35G (l) of the Central Excise Act, 1944, which is reproduced hereunder: Appeal to High Court: (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1't day of July, 2003 (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 3 purposes of assessment) rf the High Court is satisfied that the case involves a substantial question of law' Along with said section, it also relevant to tead Section 35L of the afbresai<lAct,lltlt.epallicularlysub.Section(2)toSection35L. For readv reference' the provision to Scction 35L is also being reproduced hereunder: (2) For the purposes of this Chapter' the determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment. Sub-Section (2) to Section 35L stood inserted under the Central Excise Act rv.e.l.0(>.08.1014 b-v rirtue olthe Finance Act' 2014' The ptain reading ol'the afbresaid provision i'e'' sub-Section (2) to Section 35L read u'ith Section 35G would make it evidently clear that in ths cl'rent ol a dispute in relation to the rirte of duty of excise or the value of thc goods, thc appeal dealing with the said two aspects will not be one rvhich would be maintainable before the High Court under Section 35G' Likewise' if we read Section 351-(2) along with Section 35G' it wilt further make it clear that the exception carved ottt under Section 35G so far as the appeals to thc Fligh Cottrt are concerned' it u'ould not be in respect of \
4 '* ii matters pertaining to rate of' duty of excise or the value of goods and it includes matters pertaining to determining taxability part and also matters determining the exicisability ol the goods for the purpose of assessment. This, in other words, means that wherever the question of law pertains to the rate of duty or the value of the goods or where the question of law raised either the IS determination of the taxability part or the exicisability of the goods, an appeal would lie only to the Suprerne Court and not to the High Court.
The substanl.ial qtrestion of lar,*, agitated by the leamed Senior Standing Counsel fbr the Department in the present appeal would clearly reflect that the grounds raised pertain to the taxability part, as the question of law fiamed is whether the transaction under dispute would fall wirhin the category of ,sale of goods' or 'service, under the Finance Act, 1994. This ground in terms of sub-Section (2) of Section 35L would be only one which would be challengeable before the Hon,ble Supreme Court and not by way ofan appeal under Section 35G.
5
The vieu, ol'this Bcnch stands further fo(ified from the decision of thc Division Bench of the Karnataka tligh Court in the case ol COMMISSIONEII OF STATE TAX, BANGAL()RE, r's. S(IOTT WILSON KIRKPATRICK (I) PVT. LTD.,r tvherein in paragraphs 35 and 36 it has been held as under:
Therefore, the expression 'rate' ls often used in the sense of a standard or measure 'Rate' generally is ,n ,roost. usually for current or recurrent expenditure .or".t or., a d'sirict or other local area and is distinct frorn an amounl payable for work done upon or ln r'esoect of partrcitai premises' 'Rate' is defined by w;[i", io be tne price or amount stated or frxed for ;;;';; The word 'rate' includes anv toll' due'.rent' Li'u orinrrg" lt means the scale or amount of any "in", .nrrg". The word 'rate' is used with reference ["in ," , [ercentage or proportion of taxes' and to a """ ,'" n" Jr prorerr-y 'Raie' is used tn an Act declaring i,irii."'i-"g,!'rive Assemblv shall provide bv law for a I;1",; ;;; *ual rate of taxation and assessment Irr[.t t" -,n"' percentage of fixatron' as used in :5il;,;; w tn raxatron -ag,ti,li:":3111[:^i: li: prope'1y, as used rn "onl:"1'lt.t" or setting down how :J?i:ls!fi "i:;l |_'+it:";d:u:l l'#:l .;! ine use ot the expression ratln'rn""j'i. in,"nded, but li:"'#::" ffi {}!i[, ff ^i.Tl,J::*:1,"ut il 'JillLl; l!?'it111'kil:;.*:;i n:*:: :J,:f.T iJ J:"[1: :"i]!y, ti' i t i{'u: *m:'r 3:# ffi :, "ti:='f ht*^g'H *Il"* m covered bv an exemptro.nro#;;;;; ;f ,.."rr*"nt value of servtce for tl" -J;H;";r;ing resaru to shoutd be enhanced. i',^'%;;" o;,' piovio-es ror certain matters that tne l0I I (.1-rt S' t R lll (Kar ) \
6 Questions relating to the rate of duty and to the value of Service for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of Service and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of Service for purposes of assessment is required to be lncreased or decreased rs a question that relates directly and proximately to the value of Service for purposes of assessment. Determination of rate of duty in relation to any Service include determination of a question whether any Service or not, whether the process if any undertaken in the service centre amounts to taxable Service or not, and if the Service rendered during that process are excisable goods or not would fall within the meaning of the expression 'determination of the rate of duty of excise or the value of the goods for the purposes of assessment of duty' used in Section 35G(1) and Section 35L(b) of the Act. Therefore, the phrase 'rate of tax' does not mean fraction of tax payable because what is the tax payable i.e., fraction payable rs decided by the legislature. Once that is prescribed by the legislature in the Act, the Court cannot sit in Judgment and alter or modify the said rate of tax. The Court has no juri iction to go into the correctness or otherwise of the rate of tax payable in the sense the rate prescribed by the legislature. ln the case of Finance Act 1994, the rate of service tax payable is uniform to all the services. lf rate of tax is to be understood in the sense it is suggested, Section 35G and 35L, has no application at all to the Finance Act. Such an interpretation would render Section 83 in so far as applying the provisions of section 3fu and 35L redundant. Then there is no provision in the Finance Act, 1994 for determination of the aforesaid disputes. That was not the intendment of the Parliament. Therefore, the argument that the rate of tax means only the rate at which tax is payable or a fraction is unsustarnable.
Broadly the following disputes do not fall within the juri iction of High Court under Section 35(g) of the Act: (a) Dispute relating to the service tax payable on any servlce /taxable service. (b) The value of the taxable service for the purposes of assessment
7 (c) A dispute as to the classification of services. (d) Whether those services are covered by an exemption notification or not. (e) Whether the value of services for the purposes of assessment is required to be rncreased or decreased (t) I he question of whether any services are taxable services or not (g) Whether an activrty is a service rendering activity or not, so as to attract levy of service tax (h) Whether a particular services fall within which heading, sub-heading of Section 65(105) of the Service Act 1994 which defines "taxable service".
A similar vicw has also been taken bv the Division Bench of the Bornbal,- tligh ('oLrrt in the case of COMMISSIONER OF PVT. L'ID..2 rvherc'in in paragraphs 6 to 9 it was held as under 6. Sections 35G and 35L of the Excise Act are quoted as under .- "35G. Appeal to High Court. - (1)An appeal shall lre to the Hrgh Court from every order passed in appeal by the Appellate Tribunal on or after the '1"'day of July, 2003 (not being an order relating, among other thlngs, to the determtnation of any question having a relation to the rate of duty of excise or to the value of goods for the purposes oi assessment)' if the High. Court. is satisiied that the case involves a substantial question of law i5r. appeat to Supreme Court - ('1) An appeal shall lie to tne SuPreme Court from - (a) anv ludament of the High Court delivered - ir1 in an appeal made under section 35Gl or (ii) on a reierence made under section 35G by the Appellate Tribunal before the 1st day of July,2003, '2023(701(;.S.'f L l58 (Uorn.) \ I
8 (iii) on a reference made under section 35H, in any case which, on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after passing of the judgment, the High Court certifies to be a frt one for appeal to the Supreme Court, or (b) any order passed before the establishment of the National Tax Tribunal 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. (2) For the purpose of this Chapter, the determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment." (Emphasis supplied)
The Apex Court in the case of Navin Chemicals Manufacturing and Trading Company Limited v. Collector of Customs [1993 (68) E.L.T 3 (S.C ) = 1993 taxmann.com 522 (SC)l has decided that classification issue is an issue of rate of duty and/or value of goods for the purposes of assessment. Paragraph 11 of the said decision is usefully quoted as under :- "1 '1 . lt will be seen that sub-section (5) of section 129D uses the said expression determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment and the Explanation thereto provides a definition of it for the purposes of this sub-section. The Explanation says that the expression includes the determination of a question relating to the rate of duty; to the valuation of goods for purposes of assessment; to the classification of goods under the Tariff and whether or not they are covered by an exemption notification; and whether the value of goods for- prrpos"s'oi assessmenl should be enhanced or reduced having regard to certain matters that tne saiJ Act provides for. Atrhough rh" E;pd;ui;; expressly confines the definition of tne saiJ expression to sub-section (5) of Section 129D, it is proper that the said expression usea in inl other parts of the said Act should O. ,-t"roiui""i similarly. The statutory definition ";;;;i;;l; the meanrng we have given to in"-..ij expression above. euestions ,etatinj lo -tiJ rate of duty and to the value of S*0" i"i
9 , \ purposes of assessment are questions that squarely fall within the meaning of the said expression A dispute as to the classification of goods and as to whether or not they are iovered by an exemptlon notificatton relates directly and proximately to the rate of duty applicable thereto for purposes of assessment Whether the value of goods for purposes of assessment is required to be increased or decreased is a question that relates directly and proxrmately to the value of goods for purposes of assessment. The statutory definition of the sard expression lndicates that lt has to be read to limit ils application to cases where' for the purposes of assessment, questions arise directly and proximately as to the rate o{ duty or the value of the goods'' (EmPhasis suqPlied)
The Hon'ble Supreme Court having decided that classllrcatlon issue in Navtn Chemicals Manufacturing and Trading Company Limited v Collector-of Customs (supra) in in issue of rate of duty and for value of goods for the purooses of assessment' the same is 6inding on us' Therefore' in view o{ Section 35G(1) as quoted above, wnicn- sfecificatly- prohibits ,an appeal being entertalneO UV tn'" Court' if it ls an order of the Tribunal retating 'a;ongst other ll'lS1- to tn" determlllatlorl oi any q-uestion having - -artsen on accountof'"t"orj'ily"o-iint"'"tuuofgoods"forthe purposes or "'"JtilLni inis court would not have JUri ictron ' 9' Consrdering the above discussion and th'at Question No 5(c) '"t"" "i""L"Jritlt-tn itt'" that-would need to be decided";;";;il'in't this appeal is not [:r,t* ," * :1iitt:;*"tgil iB', "',n[l[: SuPreme Court Act 8. -l-his vieg' also slauds reiterated by the Division Bench of Guahati tligh Cotur in tl.re case of COMMISSIONER OF CGST' GUWAHATI vs' OII- INDIA LIMITEDT' \ I '2023(185) t.,-t.-1 814 ((lALl')
10 9. [n view of the aforesaid judicial precedents and the statutory provision reflected in the preceding paragraphs, we are of the considered opinion that the grounds ol challenge to the irnpugned order and the proposed substantial questions of law are not grounds which would be pennissible for the appellant to challenge under Section 35G, rather these are grounds which rvould be perhaps , qy4-ilable to the appellant under Section 35L ol the Central Excise ) Act, 1994 only befbre the Suprerne Court.
Reserving the right of the appeilant lor availing the same, if at all if they so rvant, the present appeal stands rejected on the technical ground of maintainability. There shalI be no order as to costs. Consequently, miscellaneous petitions pcnding, il any, shalt stand closed M. M JOINT ISTRAR To, Thq Customs, Excise and Bench, Hyderabad. /ffRUE GOPY// SECTION OFFICER Service Tax A te Tribunal, Regional 1 I ? 9* 99 b yt. vijh.ay K punna (SENtoR sc FoR cBtC) topucl I
One CC to M/s. Lakshmi Kumaran & Sridharan, nOvocateiOeU-1
Two CD Copies KAM ,I
7 HIGH COURT DATED: 2010412026 JUDGMENT CEA.No.10 of 2026 REJECTING THE CEA t 1 H€S 14 [ 6 JUN 2026 o t L 7r. c'. * P4T 6s D * t.o H c fT L 9b v @
Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.