High Court Criticizes GST Authority for Contesting Commissioner's Decision in SpiceJet Tax Dispute Regarding Services
The Supreme Court of India has dismissed an appeal filed by the Central Goods and Services Tax (CGST) and Central Excise department, Delhi South, against an order passed by their own Commissioner in a service tax dispute with SpiceJet. This decision comes after the department pursued the appeal despite losing at every stage, a move that has been criticised by the court.
The dispute stemmed from a show cause notice dated October 21, 2014, issued to SpiceJet on three issues. The first issue was whether the airline had wrongly availed CENVAT credit of ₹21.55 crore for July 2010-March 2011 in violation of Rule 6(3A) of the CENVAT Credit Rules, 2004. The second issue was whether service tax of ₹4.01 crore was leviable on excess baggage charges collected from passengers. The third issue was whether the extended limitation period under Section 73(1) of the Finance Act, 1994 could be invoked to initiate proceedings for suppression of facts.
On March 31, 2016, the Commissioner of Service Tax ruled in favor of SpiceJet. However, the CGST department subsequently appealed to the Supreme Court, a move that has been met with criticism. The High Court held that any appeal from the CESTAT order lay directly to the Supreme Court under Section 35L. Despite this, the department chose to appeal to the Supreme Court, a decision that the court has now deemed not maintainable.
During the hearing, the Court questioned the CGST department's pursuit of an appeal against an order passed by its own adjudicating authority. The Supreme Court has publicly reprimanded the GST department for pursuing such appeals, signalling that the department’s approach was viewed as unwarranted or contrary to the standard practice of respecting the Commissioner's rulings when upheld through stages of litigation. The Court's dismissal of the appeal further emphasises this sentiment.
The dispute before the High Court was framed as one of limitation. The Commissioner approached the Delhi High Court under Section 35G of the Central Excise Act, 1944. The High Court clarified that its dismissal would not prevent the GST authority from approaching the Supreme Court. However, the Supreme Court's dismissal of the appeal marks the end of the department's legal challenge in this case.
Advocate Charanya Lakshmikumaran from Lakshmikumaran & Sridharan represented SpiceJet in the Supreme Court, while Senior Advocate Arjit Prasad represented the CGST authority. A Division Bench of Justices Prathiba M Singh and Amit Sharma dismissed the appeal.
The dismissal of the GST department’s appeals against its own Commissioner's order in the SpiceJet case leads to Supreme Court criticism because the department continued litigation despite losing at every stage, suggesting a strategy to challenge unfavorable rulings rather than acceptance of settled orders. This case serves as a reminder of the importance of respecting the decisions of adjudicating authorities and the consequences of pursuing unwarranted litigation.
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