The Karnataka High Court has dismissed the Revenue’s appeal against a tribunal order concerning a ₹4.31 crore service tax demand, holding that the dispute over whether services constitute intermediary services or exports must be taken to the Supreme Court.

The Bench of Justice R. Devdas and Justice Dr. K. Manmadha Rao has observed that the dispute involved classification and taxability, bringing it within the statutory exclusion from the High Court’s appellate jurisdiction under Section 35G of the Central Excise Act, 1944. The judgment was delivered on September 24, 2026.

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The Commissioner of Central Taxes, Bengaluru North Commissionerate, challenged the Customs, Excise and Service Tax Appellate Tribunal’s order dated May 9, 2025, insofar as it concerned Infineon Technologies (I) Pvt. Ltd.

The department sought restoration of the adjudication order dated February 27, 2018, involving a service tax demand of ₹4,30,98,787, along with interest and penalties.

The underlying dispute concerned marketing promotion and after-sales services supplied by the company to its overseas entity, Infineon Technologies Asia Pacific Pvt. Ltd., Singapore. The tax authorities treated these activities as intermediary services, alleging that they linked the overseas entity with consumers or recipients in India.

The tribunal examined the agreements between the entities and found that the Indian company did not arrange or facilitate a main supply between the Singapore entity and its customers in India. It consequently held that the services were not intermediary services and qualified as exports.

At the outset, the company raised an objection to the maintainability of the Revenue’s appeal. It argued that the tribunal’s decision concerned the taxability and classification of services and that the appropriate appellate forum was the Supreme Court under Section 35L of the Central Excise Act.

The company relied on the Supreme Court’s decision in Alupro Building Systems Pvt. Ltd. v. Commissioner of Central Excise, Bangalore-II, reported as 2026 INSC 582.

The department however, maintained that the dispute merely concerned whether the company was an intermediary under Rule 2(f) of the Place of Provision of Services Rules, 2012. It argued that the issue did not involve determination of the rate of duty and could therefore be examined by the High Court under Section 35G.

The High Court examined the relationship between Sections 35G and 35L. Drawing from the Supreme Court’s ruling in Alupro Building Systems, it explained that tribunal orders concerning questions related to the rate of duty or valuation for assessment fall outside the High Court’s jurisdiction.

The Bench noted that Section 35L(2) includes questions concerning taxability or excisability within the determination of questions relating to the rate of duty.

It further explained that the statutory exclusion extends beyond disputes about a numerical tax rate. The relevant question must bear a relationship to the rate or value in the context of assessment.

The court also referred to Navin Chemicals Manufacturing & Trading Co. Ltd. v. Collector of Customs, reported as (1993) 4 SCC 320, concerning the direct relationship between classification, exemption and the applicable rate of duty.

Reading the provisions together, the Bench observed that Sections 35G and 35L establish an exhaustive and mutually exclusive appellate scheme: matters excluded from the High Court’s jurisdiction under Section 35G fall within the Supreme Court’s jurisdiction under Section 35L.

The High Court noted that the tribunal had considered two central questions: whether the company was an intermediary under the Place of Provision of Services Rules, 2012, and whether its services to the overseas parent entity qualified as exports under Rule 6A of the Service Tax Rules, 1994.

The Bench held that these questions concerned classification and taxability and therefore fell within the exclusion contained in Section 35G.

The High Court dismissed the appeal as not maintainable and reserved liberty to the Revenue to approach the Supreme Court in accordance with law.

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