CESTAT remanded a service tax case after finding defects in the appeal filed before Commissioner (Appeals).

May 12, 2026 : The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, has remanded a service tax dispute involving Navi Mumbai-based Salini NDT Services Pvt Ltd after finding that the company had failed to properly file grounds of appeal before the first appellate authority. In a significant ruling highlighting the importance of procedural compliance in tax litigation, the Tribunal observed that statutory appeal requirements cannot be treated as mere technical formalities.

The dispute arose after the GST and Central Excise department received Income Tax Return (ITR) data for the financial year 2016-17 from the Income Tax Department. Based on discrepancies allegedly noticed between income records and service tax returns, the department sought financial documents, including Form 26AS and related records, for the period from 2016-17 to June 2017-18. According to the order, the company did not furnish the required records during investigation, prompting the department to proceed with a best judgment assessment under Section 73(1) of the Finance Act, 1994.

A show cause notice dated October 11, 2021 was subsequently issued alleging short payment of service tax amounting to Rs 25.42 lakh along with interest and penalties. The department invoked the extended limitation period under the proviso to Section 73(1) of the Finance Act, alleging suppression and non-disclosure.

During adjudication proceedings, Salini NDT Services submitted a reconciliation statement comparing figures reflected in its income tax returns and service tax returns. The company also produced challans showing payment of Rs 6.85 lakh in service tax. It further claimed exemption on services rendered to Special Economic Zone (SEZ) units under Notification No. 12/2013-ST dated July 1, 2013. However, the adjudicating authority recorded that documentary evidence supporting the SEZ exemption claim had not been adequately furnished.

The adjudicating authority partially accepted the company’s defence and dropped the demand to the extent of Rs 10.92 lakh. However, it confirmed the remaining demand of Rs 14.49 lakh along with applicable interest and penalties under the Finance Act, 1994.

Aggrieved by the order, the company approached the Commissioner (Appeals). The appellate authority, however, dismissed the appeal on February 29, 2024, primarily on the ground that the appellant had failed to submit proper grounds of appeal along with Form ST-4, the prescribed statutory format for filing service tax appeals. The Commissioner (Appeals) also noted that the appellant had not submitted balance sheets, profit and loss accounts, Form 26AS, sales registers, invoices, or a Chartered Accountant-certified reconciliation statement necessary to verify the SEZ exemption claim.

Before the Tribunal, counsel for the appellant argued that all relevant documents, including evidence relating to SEZ exemption, had in fact been produced before the Commissioner (Appeals), but were allegedly ignored. The Revenue defended the appellate order, contending that the company had failed to comply with mandatory procedural requirements prescribed under law.

Delivering the order, Judicial Member Ajay Sharma emphasised that the filing of grounds of appeal is not an empty procedural ritual but a substantive legal requirement that enables the appellate authority to understand the precise challenge against the original order. The Tribunal observed that Form ST-4 specifically mandates the inclusion of “Statement of Facts” and “Grounds of Appeal,” and these pleadings were entirely absent in the appeal filed before the Commissioner (Appeals).

The Tribunal stated that “when a statute prescribes a specific form or manner for the exercise of a right, the prescribed procedure must be strictly adhered to.” It further observed that without clearly articulated grounds of challenge, the appellate authority could not be expected to meaningfully adjudicate the dispute.

At the same time, the Tribunal recognised that substantive justice required the appellant to be given a fair opportunity to present its case on merits. The bench noted that the SEZ exemption claim and supporting evidence deserved proper examination by the first appellate authority through a correctly framed appeal accompanied by all relevant documents.

Accordingly, CESTAT set aside the Commissioner (Appeals) order and remanded the matter for fresh adjudication. The Tribunal directed the appellant to file a proper statement of facts, detailed grounds of appeal, and all supporting documentary evidence within four weeks. It further instructed the Commissioner (Appeals) to provide an opportunity of hearing to both parties and pass a “speaking and reasoned order” in accordance with law without being influenced by earlier observations.

The ruling is significant for taxpayers and litigants dealing with indirect tax disputes because it reiterates that procedural compliance in appellate proceedings is critical, particularly under legacy service tax laws that continue to generate litigation even after the implementation of GST. The decision also reflects the judiciary’s approach of balancing procedural discipline with the principles of natural justice, especially where substantive tax liabilities and exemption claims are involved.

The case also highlights the continuing importance of maintaining reconciliation records between income tax filings, GST or service tax returns, and exemption-related documentation. Tax professionals say the order serves as a reminder that appellate remedies can fail not only on merits but also due to defective pleadings and incomplete statutory filings.

Case Title: Salini NDT Services Pvt Ltd v. Commissioner of CGST and Central Excise, Belapur