The Hon’ble Supreme Court in the case of Commissioner of Central Excise & Service Tax Ahmedabad v. Adani Power Mundra Ltd. [Civil Appeal Diary No. 31293/2025 dated July 15, 2025] held that compliance with the CESTAT Ahmedabad’s order granting refund of service tax on ocean freight under reverse charge must await the final outcome of the pending appeal in SAL Steel Ltd. v. Union of India, which questions the constitutional validity of that levy.
Facts:
The Commissioner of Central Excise & Service Tax, Ahmedabad (“the Appellant”) challenged the CESTAT West Zonal Bench’s order dated November 21, 2024 (STA No. 10307/2023), which allowed Adani Power Mundra Ltd. (“the Respondent”) to claim a refund of service tax paid on ocean freight under reverse charge for input services used in SEZ-authorized operations.
The CESTAT’s reasoning was that “irrespective of the constitutional validity of the levy of service tax on ocean freight, which is before the Supreme Court in SAL Steel Ltd. v. Union of India,” the Respondent remained entitled to the refund under the applicable SEZ notification.
The Appellant sought to stay compliance with the refund order until the Supreme Court determined whether the ocean freight levy itself was constitutional.
Issue:
Whether the Respondent must defer compliance with the CESTAT’s refund order until the Supreme Court decides the pending SAL Steel appeal on the levy’s constitutional validity?
Held:
The Supreme Court in Civil Appeal Diary No. 31293/2025 has condoned the delay and issued notice to the Respondent:
- The Court directed that “any compliance with the impugned order would be subject to the decision of this Court in the aforesaid case” (SAL Steel appeal).
- Until the Supreme Court’s final ruling in Diary No. 2723/2020 (SAL Steel Ltd.), the Appellant need not execute the CESTAT refund order.
Our Comments:
This order postpones the actual refund until the Supreme Court finally decides whether service tax on ocean freight is valid at all. If the levy is ultimately upheld, SEZ units will not get money back they’re not entitled to but if it is struck down, they will receive the refund without further delay.
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