Telangana High Court
The Commissioner Of Central Tax And … vs Ws Zoom Technologies (India) Pvt Ltd on 20 April, 2026
Author: P.Sam Koshy
Bench: P.Sam Koshy
IN THE HIGH COURT FOR THE STATE OF TELANGANA
AT HYDERABAD
THE HONOURABLE SRI JUSTICE P.SAM KOSHY
AND
THE HONOURABLE SRI JUSTICE NARSING RAO
NANDIKONDA
C.E.A No.10 OF 2026
20.04.2026
Between:
The Commissioner of Central Tax & Customs,
Hyderabad GST Commissionerate,
L B Statium Road, Basheer Bagh,
Hyderabad, Telngana - 500 004.
...Appellant
AND
M/s Zoom Technologies (India) Pvt. Ltd.,
8-2-695/E/1, Road No.12, Banjara Hills,
Hyderabad, Telangana - 500 034.
...Respondent
JUDGMENT:
(per Hon’ble Sri Justice P.Sam Koshy)
Heard Mr. Vijhay K. Punna, learned Senior Standing
Counsel for the CBIC for the appellant and Mr.Narendra Dave,
learned counsel representing M/s Lakshmi Kumaran & Sridharan
for the respondent. Perused the record.
2. The challenge in the present central excise appeal under
Section 35G of the Central Excise Act, 1944 is to the order passed
2
by the Customs, Excise and Service Tax Appellate Tribunal
(CESTAT), Hyderabad dated 11.09.2025.
3. The contention of the learned counsel for the appellant is
that the nature of transaction involved is the right to use
information technology software for commercial exploitation and
such transactions fall within the definition of Information
Technology Software Service (ITSS) under Section 65(105)
(zzzze) of the Finance Act, 1994.
4. The question of law which the learned counsel for the
appellant is trying to raise is whether the nature of transaction
carried out by the respondent would amount to a sale of goods or
a service rendered under the Finance Act, 1994 under the
aforesaid section. It would be relevant, at this juncture, to take
note of the relevant section i.e., Section 35G (1) of the Central
Excise Act, 1944, which is reproduced hereunder:
Appeal to High Court: (1) An appeal shall lie to
the High Court from every order passed in appeal by
the Appellate Tribunal on or after the 1st day of July,
2003 (not being an order relating among other things,
to the determination of any question having a relation
to the rate of duty of excise or to the value of goods for
3purposes of assessment), if the High Court is satisfied
that the case involves a substantial question of law.
Along with said section, it also relevant to read Section 35L of the
aforesaid Act, more particularly sub-Section (2) to Section 35L.
For ready reference, the provision to Section 35L is also being
reproduced hereunder:
(2) For the purposes of this Chapter, the
determination of any question having a relation to
the rate of duty shall include the determination of
taxability or excisability of goods for the purpose
of assessment.
Sub-Section (2) to Section 35L stood inserted under the Central
Excise Act w.e.f., 06.08.2014 by virtue of the Finance Act, 2014.
The plain reading of the aforesaid provision i.e., sub-Section (2)
to Section 35L read with Section 35G would make it evidently
clear that in the event of a dispute in relation to the rate of duty of
excise or the value of the goods, the appeal dealing with the said
two aspects will not be one which would be maintainable before
the High Court under Section 35G. Likewise, if we read Section
35L(2) along with Section 35G, it will further make it clear that
the exception carved out under Section 35G so far as the appeals
to the High Court are concerned, it would not be in respect of
4
matters pertaining to rate of duty of excise or the value of goods
and it includes matters pertaining to determining taxability part and
also matters determining the exicisability of the goods for the
purpose of assessment. This, in other words, means that wherever
the question of law pertains to the rate of duty or the value of the
goods or where the question of law raised is either the
determination of the taxability part or the exicisability of the goods,
an appeal would lie only to the Supreme Court and not to the High
Court.
5. The substantial question of law agitated by the learned
Senior Standing Counsel for the Department in the present appeal
would clearly reflect that the grounds raised pertain to the
taxability part, as the question of law framed is whether the
transaction under dispute would fall within the category of ‘sale of
goods’ or ‘service’ under the Finance Act, 1994. This ground in
terms of sub-Section (2) of Section 35L would be only one which
would be challengeable before the Hon’ble Supreme Court and not
by way of an appeal under Section 35G.
5
6. The view of this Bench stands further fortified from the
decision of the Division Bench of the Karnataka
High Court in the case of COMMISSIONER OF STATE TAX,
BANGALORE vs. SCOTT WILSON KIRKPATRICK (I)
PVT. LTD., 1 wherein in paragraphs 35 and 36 it has been held as
under:
35. Therefore, the expression ‘rate’ is often used in
the sense of a standard or measure. ‘Rate’ generally is
an impost, usually for current or recurrent expenditure,
spread over a district or other local area and is distinct
from an amount payable for work done upon or in
respect of particular premises. ‘Rate’ is defined by
Webster to be the price or amount stated or fixed for
anything. The word ‘rate’ includes any toll, due, rent,
rate or charge. It means the scale or amount of any
other charges. The word ‘rate’ is used with reference
both to a percentage or proportion of taxes, and to a
valuation of property. ‘Rate’ is used in an Act declaring
that the Legislative Assembly shall provide by law for a
uniform and equal rate of taxation and assessment,
applies to the percentage of fixation, as used in
connection with ‘taxation’ and to the valuation of the
property, as used in connection with ‘assessment’. It is
a valuation of every man’s estate or setting down how
everyone shall pay, or be charged with, to any tax. By
the use of the expression ‘rate’ a relation between the
taxable income and the tax charged is intended, but
the relation need not be of the nature of proportion of
fraction. The Explanation to Sub-section (5) of
Section 35E of the Central Excise Act, the
expression includes the determination of a question
relating to the rate of duty, to the value of Service for
the purposes of assessment; to the classification of
Service under the Tariff and whether or not they are
covered by an exemption notification: and whether the
value of Service for the purposes of assessment
should be enhanced or reduced having regard to
certain matters that the said Act provides for.
1
2011 (23) S.T.R 321 (Kar.)
6
Questions relating to the rate of duty and to the value
of Service for purposes of assessment are questions
that squarely fall within the meaning of the said
expression. A dispute as to the classification of Service
and as to whether or not they are covered by an
exemption notification relates directly and proximately
to the rate of duty applicable thereto for purposes of
assessment. Whether the value of Service for
purposes of assessment is required to be increased or
decreased is a question that relates directly and
proximately to the value of Service for purposes of
assessment. Determination of rate of duty in relation
to any Service include determination of a question
whether any Service or not, whether the process if any
undertaken in the service centre amounts to taxable
Service or not, and if the Service rendered during that
process are excisable goods or not would fall within the
meaning of the expression ‘determination of the rate of
duty of excise or the value of the goods for the
purposes of assessment of duty’ used in Section
35G(1) and Section 35L(b) of the Act. Therefore, the
phrase ‘rate of tax’ does not mean fraction of tax
payable because what is the tax payable i.e., fraction
payable is decided by the legislature. Once that is
prescribed by the legislature in the Act, the Court
cannot sit in judgment and alter or modify the said rate
of tax. The Court has no jurisdiction to go into the
correctness or otherwise of the rate of tax payable in
the sense the rate prescribed by the legislature. In the
case of Finance Act 1994, the rate of service tax
payable is uniform to all the services. If rate of tax is to
be understood in the sense it is suggested, Section
35G and 35L, has no application at all to the Finance
Act. Such an interpretation would render Section 83 in
so far as applying the provisions of section 35g and
35L redundant. Then there is no provision in
the Finance Act, 1994 for determination of the
aforesaid disputes. That was not the intendment of the
Parliament. Therefore, the argument that the rate of tax
means only the rate at which tax is payable or a
fraction is unsustainable.
36. Broadly the following disputes do not fall within
the jurisdiction of High Court under Section 35(g) of the
Act:
(a) Dispute relating to the service tax payable
on any service /taxable service.
(b) The value of the taxable service for the
purposes of assessment
7
(c) A dispute as to the classification of services.
(d) Whether those services are covered by an
exemption notification or not.
(e) Whether the value of services for the
purposes of assessment is required to be
increased or decreased.
(f) The question of whether any services are
taxable services or not
(g) Whether an activity is a service rendering
activity or not, so as to attract levy of service
tax.
(h) Whether a particular services fall within
which heading, sub-heading of Section 65(105)
of the Service Act 1994 which defines “taxable
service”.
7. A similar view has also been taken by the Division Bench of
the Bombay High Court in the case of COMMISSIONER OF
CGST AND CENTRAL EXCISE, THANE VS. AJIT INDIA
PVT. LTD., 2 wherein in paragraphs 6 to 9 it was held as under:
6. Sections 35G and 35L of the Excise Act are quoted
as under :-
“35G. Appeal to High Court. – (1) An appeal shall
lie to the High Court from every order passed in appeal
by the Appellate Tribunal on or after the 1st day of July,
2003 (not being an order relating, among other things,
to the determination of any question having a relation
to the rate of duty of excise or to the value of goods for
the purposes of assessment), if the High Court is
satisfied that the case involves a substantial question
of law.
35L. Appeal to Supreme Court. – (1) An appeal shall
lie to the Supreme Court from –
(a) any judgment of the High Court delivered –
(i) in an appeal made under section 35G; or
(ii) on a reference made under section 35G by
the Appellate Tribunal before the 1st day of
July, 2003;
2
2023(70) G.S.T.L. 158 (Bom.)
8
(iii) on a reference made under section 35H, in
any case which, on its own motion or on an oral
application made by or on behalf of the party
aggrieved, immediately after passing of the
judgment, the High Court certifies to be a fit one
for appeal to the Supreme Court; or
(b) any order passed before the establishment of the
National Tax Tribunal by the Appellate Tribunal
relating, among other things, to the determination of
any question having a relation to the rate of duty of
excise or to the value of goods for purposes of
assessment.
(2) For the purpose of this Chapter, the
determination of any question having a relation to the
rate of duty shall include the determination of taxability
or excisability of goods for the purpose of assessment.”
(Emphasis supplied)
7. The Apex Court in the case of Navin Chemicals
Manufacturing and Trading Company Limited v.
Collector of Customs [1993 (68) E.L.T. 3 (S.C.) = 1993
taxmann.com 522 (SC)] has decided that classification
issue is an issue of rate of duty and/or value of goods
for the purposes of assessment. Paragraph 11 of the
said decision is usefully quoted as under :-
“11. It will be seen that sub-section (5) of
section 129D uses the said expression
determination of any question having a relation
to the rate of duty or to the value of goods for
the purposes of assessment and the
Explanation thereto provides a definition of it for
the purposes of this sub-section. The
Explanation says that the expression includes
the determination of a question relating to the
rate of duty; to the valuation of goods for
purposes of assessment; to the classification of
goods under the Tariff and whether or not they
are covered by an exemption notification; and
whether the value of goods for purposes of
assessment should be enhanced or reduced
having regard to certain matters that the said
Act provides for. Although this Explanation
expressly confines the definition of the said
expression to sub-section (5) of Section 129D,
it is proper that the said expression used in the
other parts of the said Act should be interpreted
similarly. The statutory definition accords with
the meaning we have given to the said
expression above. Questions relating to the
rate of duty and to the value of goods for
9purposes of assessment are questions that
squarely fall within the meaning of the said
expression. A dispute as to the classification of
goods and as to whether or not they are
covered by an exemption notification relates
directly and proximately to the rate of duty
applicable thereto for purposes of assessment.
Whether the value of goods for purposes of
assessment is required to be increased or
decreased is a question that relates directly and
proximately to the value of goods for purposes
of assessment. The statutory definition of the
said expression indicates that it has to be read
to limit its application to cases where, for the
purposes of assessment, questions arise
directly and proximately as to the rate of duty or
the value of the goods.’
(Emphasis supplied)
8. The Hon’ble Supreme Court having decided that
classification issue in Navin Chemicals Manufacturing
and Trading Company Limited v. Collector of Customs
(supra) in an issue of rate of duty and for value of
goods for the purposes of assessment, the same is
binding on us. Therefore, in view of Section 35G(1) as
quoted above, which specifically prohibits an appeal
being entertained by this Court, if it is an order of the
Tribunal relating amongst other things to the
determination of any question having arisen on
account of “rate of duty” or the “value of goods” for the
purposes of assessment, this Court would not have
jurisdiction.
9. Considering the above discussion and that question
No. 5(c) refers to classification issue that would need
to be decided, we hold that this appeal is not
maintainable before this Court and the course of action
available to the appellant is to file an appeal before the
Supreme Court under Section 35L(1)(b) of the Excise
Act.
8. This view also stands reiterated by the Division Bench of
Guahati High Court in the case of COMMISSIONER OF CGST,
GUWAHATI vs. OIL INDIA LIMITED3.
3
2023(385) E.L.T 834 (GAU.)
10
9. In view of the aforesaid judicial precedents and the statutory
provision reflected in the preceding paragraphs, we are of the
considered opinion that the grounds of challenge to the impugned
order and the proposed substantial questions of law are not grounds
which would be permissible for the appellant to challenge under
Section 35G, rather these are grounds which would be perhaps
available to the appellant under Section 35L of the Central Excise
Act, 1994 only before the Supreme Court.
10. Reserving the right of the appellant for availing the same,
if at all if they so want, the present appeal stands rejected on the
technical ground of maintainability. There shall be no order as to
costs.
Consequently, miscellaneous petitions pending, if any, shall
stand closed.
_____________________
P.SAM KOSHY, J
_________________________________
NARSING RAO NANDIKONDA, J
20.04.2026
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