The Karnataka High Court has dismissed the department’s appeal against a tribunal ruling in favour of assessee holding that a dispute concerning the classification and taxability of services must be challenged before the Supreme Court under Section 35L of the Central Excise Act, 1944.
The bench of Justice R. Devdas and Justice Dr. K. Manmadha Rao has observed that the question whether marketing services supplied to an overseas entity constitute “intermediary services” or qualify as export of services falls outside the High Court’s appellate jurisdiction under Section 35G of the Act.
The Commissioner of Central Tax, Bangalore North, challenged the Customs, Excise and Service Tax Appellate Tribunal’s final order dated October 7, 2024, concerning two service tax appeals filed by the assessee.
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The department sought to set aside the tribunal’s decision and restore the adjudication orders dated February 9, 2018, and February 27, 2021.
The underlying dispute concerned marketing services rendered by Salesforce.com India to Salesforce.com Singapore Private Limited, referred to in the judgment as SFDC Singapore.
According to the department’s show-cause notice, the Indian company acted as an intermediary by linking the main service provider in Singapore with consumers or recipients of its services in India. The department’s position was that these activities constituted intermediary services under Rule 2(f) of the Place of Provision of Services Rules, 2012.
The tribunal examined the agreement and the relationship between the two entities. It concluded that Salesforce.com India did not arrange or facilitate the provision of a main supply between SFDC Singapore and its customers or clients. Consequently, it held that the services could not be treated as intermediary services provided in India and qualified as export of services.
At the outset, Salesforce.com India raised an objection to the maintainability of the Revenue’s appeal.
The company argued that an appeal under Section 35G could not be entertained by the High Court because the tribunal’s decision involved the classification and taxability of services. It submitted that the appropriate appellate forum was the Supreme Court under Section 35L.
In support, the company relied on the Supreme Court’s decision in M/s. Alupro Building Systems Pvt. Ltd. v. Commissioner of Central Excise, Bangalore-II, reported as 2026 INSC 582.
It argued that the statutory exclusion from the High Court’s jurisdiction extends to questions concerning taxability or excisability for assessment purposes. Since the tribunal had determined whether its activities were intermediary services and whether they qualified as exports, the dispute fell within that exclusion.
The company also referred to the tribunal’s consideration of internet-based customer relationship applications and services using proprietary software and technology, classifiable as information technology software services.
The department opposed the jurisdictional objection, contending that the case did not involve determination of any question relating to the rate of duty.
It argued that the tribunal had merely examined whether Salesforce.com India was an intermediary under Rule 2(f) of the Place of Provision of Services Rules, 2012.
The department submitted that it was challenging the tribunal’s finding that the company was not an intermediary and that its services qualified as exports because they were supplied to an entity outside India and consideration was received in convertible foreign exchange.
On this basis, the Revenue maintained that the appeal was within the scope of Section 35G and could be heard by the High Court.
The High Court examined the scope of Sections 35G and 35L in light of the Supreme Court’s ruling in Alupro Building Systems.
It explained that Section 35G permits appeals to the High Court from tribunal orders that do not concern determination of questions relating to the rate of excise duty or the value of goods for assessment. Section 35L provides the corresponding appellate route to the Supreme Court for orders involving such questions.
The Bench further noted that Section 35L(2) expressly includes determination of taxability or excisability of goods within questions relating to the rate of duty for assessment purposes.
Discussing the Supreme Court’s interpretation, the High Court observed that the word “any” gives the jurisdictional exclusion a wide scope. However, the connection with rate or valuation must arise in the context of assessment, rather than merely in the abstract.
The Bench also referred to Navin Chemicals Manufacturing & Trading Co. Ltd. v. Collector of Customs, reported in (1993) 4 SCC 320, which recognised that classification and the applicability of an exemption notification bear a direct and proximate relationship to the rate of duty for assessment.
The Court explained that Sections 35G and 35L operate together as a complete and mutually exclusive appellate scheme. Matters excluded from the High Court’s jurisdiction under Section 35G are covered by the Supreme Court appeal mechanism under Section 35L.
Applying these principles, the High Court examined the precise question decided by the tribunal: whether the marketing services supplied by Salesforce.com India to its Singapore entity qualified as intermediary services.
The Bench noted that the tribunal had analysed the contractual relationship and determined whether the Indian company arranged or facilitated a main supply between SFDC Singapore and its customers.
That examination led to the tribunal’s conclusion that the services were not intermediary services and qualified as exports.
The High Court held that the dispute therefore concerned classification and excisability, including the treatment of the services supplied to the overseas entity. It fell within the statutory exclusion under Section 35G and the corresponding provisions of Section 35L.
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