Principal Commissioner Of CGST v. M/S Pro-Interactive Services India Pvt. Ltd.

What happened

The respondent provides security or detective agency, manpower recruitment and construction services. An investigation by the Directorate General of GST Intelligence found that it allegedly claimed exemption for guarding and security services to foreign embassies without fulfilling the prescribed conditions. A show-cause notice dated 4 September 2019 proposed recovery of ₹3,75,95,778 with interest and penalties, and the order-in-original confirmed the duty with interest, an equal penalty under section 78 of the Finance Act, 1994 and a ₹5,000 penalty under section 77. On appeal, the CESTAT by its order of 4 September 2025 remanded the matter to verify the certificates produced and grant exemption to the extent admissible, extended cum-duty benefit where applicable, and set aside the penalties, noting that the substantive condition under Notification No. 27/2012 of providing services to diplomatic missions was not in dispute and certificates had been obtained in most cases. The Revenue appealed, arguing the notification must be strictly construed (Commissioner of Customs v. Dilip Kumar & Co.), that the conditions on certificates, undertakings, serial numbers and invoices are mandatory, that the penalties should not have been set aside, and that there was no evidence the consideration was cum-duty.

Questions before the court

• Does the CESTAT's remand to verify embassy certificates for the exemption raise a substantial question of law?

Why the court ruled this way

Strict interpretation operates at the stage of determining eligibility; once the assessee shows it falls within the notification, the conditions apply according to their tenor, and denial is not justified where substantive compliance is shown and only factual verification remains (paragraph 18). The question of substantive compliance was not in dispute (paragraph 19). The CESTAT recorded that services were rendered to diplomatic missions and that certificates had been obtained, some after adjudication, and the adjudicating authority had not examined all of them (paragraph 20). The remand did not grant exemption outright but left verification and relief only to the extent conditions were satisfied, so it neither dispensed with certification nor diluted the notification (paragraphs 21 and 22). It is open to the adjudicating authority to deny the benefit if the certificates are found wanting (paragraph 22). The remand was a discretionary step on documentary evidence and not arbitrary or perverse, and an appeal under section 35G lies only on a substantial question of law (paragraphs 23 and 24).

Controlling point

The remand for limited verification was within the CESTAT's powers and raises no substantial question of law.

Order and next steps

The appeal, with pending applications, was dismissed.

Practical implications

A service provider relying on a diplomatic-mission exemption should keep certificates and undertakings from the mission's authorised person in the form the notification prescribes; where some arrived late, a tribunal may still remand for verification.

Limits of this ruling

• The Court emphasised that the benefit remains subject to the adjudicating authority's verification of the certificates; it did not decide that the exemption is available for any particular period or client.