Commissioner of Central Excise And Service Vs Reebok India Company (Punjab And Haryana High Court)
Tax Classification Takes the Supreme Route: P&H High Court Closes the Wrong Appellate Door
Summary: In Commissioner of Central Excise & Service, Panchkula v. M/s Reebok India Company, decided on 19 August 2026, the Punjab & Haryana High Court examined a departmental appeal against the order dated 25 August 2023 passed by CESTAT, Chandigarh, in Service Tax Appeal No. 56241 of 2013.
The underlying controversy concerned the Department’s attempt to levy service tax on royalty payments by treating the transaction as an Intellectual Property Rights service taxable through the reverse charge mechanism. Another question related to the appropriate classification of certain services—whether they amounted to Business Auxiliary Service or Technical Inspection & Certification Service. Both questions directly concerned the existence, nature & classification of the service-tax liability.
While entertaining the appeal, the High Court, through its order dated 13 May 2025, recorded a preliminary objection raised by Reebok regarding the appeal’s maintainability. The respondent contended that since the dispute related to taxability & classification, the departmental appeal could be presented only before the Supreme Court. Departmental counsel was granted time to obtain instructions on this objection.
Issue before the High Court
The principal issue was whether an appeal against a CESTAT order involving taxability & classification of services was maintainable before the High Court, or whether the applicable statutory provisions required the Department to approach the Supreme Court directly.
The answer depended upon Section 35L of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994. Section 83 applies specified provisions of the Central Excise Act to service-tax proceedings. Consequently, the proper appellate forum had to be identified by examining the actual nature of the questions determined by the Tribunal.
Submissions & contentions
Reebok raised a specific preliminary objection that the departmental appeal was not maintainable before the High Court. It relied upon Section 65(105)(zzr) of the Finance Act, 1994, together with Section 35L of the Central Excise Act read with Section 83 of the Finance Act.
According to the respondent, the question whether royalty was taxable as an Intellectual Property Rights service through reverse charge was fundamentally a question of taxability. Similarly, deciding whether other services fell within Business Auxiliary Service or Technical Inspection & Certification Service necessarily involved classification. The statutory remedy against a Tribunal order deciding such questions was therefore an appeal before the Supreme Court.
The Department initially sought time to obtain instructions. At the final hearing, however, departmental counsel did not dispute that the controversy essentially related to taxability & classification. The Department also accepted that an appeal against the Tribunal’s order on these issues would lie only before the Supreme Court. Thus, no controversy survived regarding the appropriate appellate forum.
Findings of the High Court
The Division Bench comprising Acting Chief Justice Ashwani Kumar Mishra & Justice Rohit Kapoor upheld the respondent’s objection. It categorically held that the departmental appeal was not maintainable before the Punjab & Haryana High Court.
Accordingly, the appeal was dismissed. Nevertheless, the Court expressly left it open to the Department to pursue the appropriate remedy in accordance with law, meaning that it could approach the Supreme Court subject to the applicable procedural requirements. All pending applications were also disposed of.
Crucially, the dismissal was entirely jurisdictional. The High Court did not approve, reverse or independently examine CESTAT’s conclusions concerning royalty, reverse charge, Business Auxiliary Service, or Technical Inspection & Certification Service. The decision must therefore not be interpreted as a ruling on Reebok’s substantive service-tax liability.
Legal reasoning
The Court’s reasoning was based on the statutory division of appellate jurisdiction between High Courts & the Supreme Court. Questions directly involving taxability, classification, rate, or valuation fall within the special appellate route contemplated by Section 35L. Through Section 83 of the Finance Act, this arrangement applies equally to service-tax disputes.
The Bench relied upon its earlier decision in Commissioner of Income Tax v. DLF Golf Resorts Ltd., 2017 (7) GSTL 202 (P&H). Referring particularly to paragraphs 6 & 7 of that judgment, it observed that approaching the High Court in such circumstances was impermissible & that the proper remedy was an appeal before the Supreme Court. The Court also noted that the same legal position had been reiterated in several subsequent decisions.
The true nature of the dispute, rather than the manner in which the appeal was drafted, determined jurisdiction. Adjudicating the Department’s challenge would necessarily require deciding whether the activity was taxable & under which taxable category it fell. Such questions could not be converted into ordinary questions of law merely through drafting. In essence, subject matter—not nomenclature—controls the appellate forum.
Practical implications
The decision provides an important procedural warning to tax departments & assessees. Before challenging a CESTAT order, parties must carefully determine whether the controversy involves an ordinary legal issue or directly concerns taxability, classification, rate, or valuation. Filing before the wrong court can cause substantial delay, additional expense & possible limitation complications.
For the Department, the judgment highlights the need for proper appellate scrutiny before authorization of litigation. For assessees, it confirms that a maintainability objection may conclude proceedings without reopening the merits.
More broadly, the ruling preserves the statutory distribution of jurisdiction, prevents parallel appellate routes & ensures that classification disputes having wider national consequences receive uniform consideration from the Supreme Court. The decisive takeaway is that where CESTAT determines whether a service is taxable or how it must be classified, the appellate challenge must travel directly to the Supreme Court.
Cases Discussed
- Commissioner of Income Tax v. DLF Golf Resorts Ltd., 2017 (7) GSTL 202 (P&H)
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
1. While entertaining the present State Tax Appeal, this Court, vide order dated 13.05.2025, had raised the issue regarding the maintainability of the appeal. The relevant extract of the said order is reproduced hereunder:
“Learned counsel for respondent raises specific objection regarding maintainability of this appeal while submitting that such an appeal would be maintainable only before the Hon’ble the Supreme Court, because the incidence is relating to taxability and classification. Reference is made to Section 65 (105) (zzr) of the Finance Act, 1994, and provisions of Section 35L of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994.
Learned counsel for the appellant prays for some time to seek instructions.
At request, adjourned to 17.07.2025.”
2. By way of the present Appeal, challenge is made to the order dated 25.08.2023 passed by the Customs, Excise & Service Tax Appellate Tribunal, Chandigarh (hereinafter referred to as “the Tribunal”) in Service Tax Appeal No.56241 of 2013.
3. The appellant-Department sought to justify levy of service tax on the royalty claiming it to be under the ‘Intellectual Property Rights’ under reverse charge mechanism. The other question is as to whether the services rendered would amount to ‘Business Auxiliary Service’ or ‘Technical Inspection and Certification Service’.
4. The objection of the respondent is based upon the provision contained under Section 35L of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994, according to which, the issues determined by the Tribunal can be assailed in an Appeal presented to the Hon’ble Supreme Court.
5. Learned counsel for the appellant does not dispute the fact that the issue, essentially, is relating to taxability & classification and therefore, an Appeal against the order of the Tribunal would be maintainable only before Hon’ble the Supreme Court.
6. This Court in Commissioner of Income Tax Vs. DLF Golf Resorts Ltd.; 2017 (7) GSTL 202 (P&H), has clearly held in Paras 6 and 7 that approach to the High Court in such circumstances would not be permissible and the remedy available to the appellant-Department will be to prefer an Appeal before Hon’ble the Supreme Court. This view has been reiterated in several other judgments of this Court.
7. Once that be the position and the objection raised on behalf of the respondent, challenging the maintainability of the present Appeal, having been appropriately met, we hold that the present Appeal is not maintainable and the same is dismissed accordingly.
8. It shall be open for the appellant-Department to pursue the appropriate remedy in accordance with law.
9. Pending application(s), if any, shall stand disposed of accordingly.
