Karnataka High Court

M/S L And T Construction Equipment Ltd vs The Commissioner Central Tax on 11 March, 2025

Author: Krishna S Dixit

Bench: Krishna S Dixit

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                                                        NC: 2025:KHC:10166-DB
                                                              CEA No. 1 of 2023



                        IN THE HIGH COURT OF KARNATAKA AT BENGALURU
                             DATED THIS THE 11TH DAY OF MARCH, 2025
                                            PRESENT
                             THE HON'BLE MR JUSTICE KRISHNA S DIXIT
                                               AND
                       THE HON'BLE MR JUSTICE RAMACHANDRA D. HUDDAR
                              CENTRAL EXCISE APPEAL NO. 1 OF 2023
                      BETWEEN:

                      M/S L AND T CONSTRUCTION EQUIPMENT LTD
                      (FORMALLY KNOWN AS L AND T KOMATSU LTD)
                      COMPANY INCORPORATED UNDER
                      COMPANIES ACT OF 1956
                      27/28, THAMMASHETTIHALLI
                      KASABA HOBLI
                      DODDABALLAPUR TALUK
                      BANGALORE RURAL, PIN-561 203

                      REPRESENTED BY ITS HEAD-FINANCE
                      AND ACCOUNTS
                      MR. L. SRIVATHSAN
                      S/O LAKSHMINARAYANAN
                      AGED ABOUT 57 YEARS
                                                                   ...APPELLANT

Digitally signed by   (BY SRI. UDAYA HOLLA, SENIOR COUNSEL A/W
SHAKAMBARI                SRI. MOHAN MAIYA G.L AND
Location: HIGH
COURT OF                  SRI. PRITHWIRAJ CHOUDURI, ADVOCATES)
KARNATAKA

                      AND:

                      THE COMMISSIONER CENTRAL TAX
                      BANGALORE NORTH COMMISSIONERATE
                      NO.59, HMT BHAVAN
                      GROUND FLOOR, BELLARY ROAD
                      BENGALURU-560 032
                                                                 ...RESPONDENT
                      (BY SRI. ARAVIND V. CHAVAN, ADVOCATE)
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                                           NC: 2025:KHC:10166-DB
                                                CEA No. 1 of 2023



     THIS CENTRAL EXCISE APPEAL IS FILED UNDER SEC.35G
OF THE CENTRAL EXCISE ACT, 1944, PRAYING TO DECIDE THE
SUBSTANTIAL QUESTIONS OF LAW RAISED IN PARAGRAPH 52
TO 59 OR SUCH OTHER QUESTIONS AS THIS HON'BLE COURT
MAY FORMULATE IN FAVOUR OF THE APPELLAN AND THAT
THIS HON'BLE COURT BE PLEASED TO SET ASIDE THE
IMPUGNED FINAL ORDER NO.20274 (PASSED IN COMMON
ORDER 20273-20280) DATED 10.08.2022 VIDE ANNEXURE-A
PASSED BY THE HON'BLE TRIBUNAL IN APPEAL NO. E288/2011
TO THE EXTENT IT IS ADVERSE TO THE APPELLANT AND ETC.
     THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY,

JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM:    HON'BLE MR JUSTICE KRISHNA S DIXIT
          and
          HON'BLE MR JUSTICE RAMACHANDRA D. HUDDAR

                       ORAL JUDGMENT

(PER: HON'BLE MR JUSTICE KRISHNA S DIXIT)

Assessee has preferred this appeal under Section

35-G of the Central Excise Act, 1944 calling in question

CESTAT order dated 10.08.2022 whereby his Appeal

No.E-288/2011 is substantially negatived.

II. Appeal is structured on the following substantial

questions of law:

"52. Whether in the facts and circumstances of the case, the Hon'ble Tribunal erred in not following two decisions

NC: 2025:KHC:10166-DB

of the co-ordinate Bench, including one that of the same Bangalore Bench, in the cases of Essar Steel India vs. CCE, Surat-I [2016 (335) E.L.T. 660 (Tri. - Ahmd.)] and Federal Mogul (TRP) India Ltd vs. CCE, Bangalore North [2020-VIL-521-CESTAT-BLR-CE]?

53. Whether in the facts and circumstances of the case, the Hon'ble Tribunal was justified in taking a different view against the assessee in violation of principles of judicial discipline instead of referring the matter to a Larger Bench of the Hon'ble Tribunal in the event it differed with the earlier decisions of the Hon'ble Tribunal, including a decision of the Bengaluru Bench itself?

54. Whether in the facts and circumstances of the case, the Hon'ble Tribunal was Justified in placing reliance on the decision of the Hon'ble Gujarat High Court in the case of Commissioner vs. Cadila Healthcare Ltd. [2013 (30) S.T.R. 3] to conclude that the activity carried out by L&T will not qualify as Input Service for the Appellant, despite the fact that a co-ordinate bench on identical facts had held it to be not applicable?

55. Whether in the facts and circumstances of the case, the Hon'ble Tribunal was justified not to consider the applicability of the Explanation to Rule 2(1) of the Credit Rules inserted vide the Notification No. 2/2016-C.E. (N.T.), dated 3-2-2016 (hereinafter referred to as the "Notification"), which has been held by the Co-ordinate Bench to be clarificatory in nature, and hence applicable retrospectively?

56. Whether in the facts and circumstances of the case, the Hon'ble Tribunal was justified in not appreciating the settled position in law that it is the substance of the documents which determine the true nature of the transactions and not its form?

57. Whether in the facts and circumstances of the case, the Hon'ble Tribunal was justified in holding that the activity undertaken by L&T does not get covered under the ambit of the phrase "sales promotion" as contained in the inclusive part of the definition of "Input Service"

as defined in Rule 2(1) of the Credit Rules?

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58. Whether in the facts and circumstances of the case, the Hon'ble Tribunal was justified in holding that the Appellant has wrongly availed CENVAT Credit of the service tax paid by L&T as the said service does not qualify as "Input Service" as defined under Rule 2(1) of the Credit Rules?

59. Having held that the Appellant has paid sales commission to L&T, was the Hon'ble Tribunal justified in denying CENVAT Credit on an artificial distinction between sales commission and sales promotion expenses since commission is also covered by the definition of "input service" under Rule 2(1) of the CENVAT Credit Rules, 2004?"

III. Submissions at the Bar:

i) Learned Sr.Advocate Mr.Uday Holla appearing for

the Assessee submits that subject appeal including other

appeals came to be negatived by the Tribunal placing

reliance on Gujarat High Court decision in Commissioner

Vs.Cadila Healthcare Ltd., [2013 (30 S.T.R.3]. The said

decision no longer holds water in view of Apex Court

decision in Zydus Lifesciences Limited V/s.

Commissioner of Central Excise, Ahmedabad - II

reported in 2023 SCC Online SC 1593; thus, the

substratum on which the impugned order was structured

having withered away, the same is unsustainable.

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ii) Learned Sr.Panel Counsel appearing for the

Revenue resists the appeal making submission in

justification of the impugned order and the reasons on

which it has been constructed. He adds that the Tribunal

even otherwise has given its own reasons and therefore,

regardless of the decision of Gujarat High Court, the

interference of this Court is not warranted.

IV. We have heard learned Sr.Advocate Mr.Uday Holla

appearing for the appellant and the learned Sr.Panel

Counsel representing the Revenue.

a) Having heard and having perused the appeal

papers, we are framing the following substantial questions

of law for consideration, having kept in mind the questions

framed by the assessee as above:

"i) Whether the Gujarat High Court decision in Cadila is no longer good law in view of subsequent Apex Court decision in Zydus supra...?

ii) When High Court decision on which the Tribunal has placed

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reliance is reversed or overruled, its order becomes unsustainable, unless it is otherwise sustainable...?

We answer the above questions in the affirmative and in

favour of the assessee, there being no much disagreement

on the position of law declared by the Apex Court in Zydus

supra.

b) We find force in the submission of Mr.Holla that

the Tribunal has decided the lis mainly placing reliance on

the decision of Gujarat High Court in Cadila supra. He is

right in telling us that the correct position of law having

been declared by the Apex Court in Zydus supra, the

impugned order of the Tribunal has become unsustainable.

c) We do not agree with the contention of learned

Panel Counsel appearing for the Revenue that even de