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The Mariners and their imperious frontline put on a full-throttle attacking showpiece in the first half where they hit the back of the net thrice to push the Red & Gold Brigade back early on in the proceedings.
Sajjad Parray scored the winner in the 89th minute in a 1-0 win.
Shafeel scored the winner in the 67th minute as Services won the final 1-0 to lift their seventh Santosh Trophy.
City and Jamshedpur played out a 1-1 draw in the Indian Super League on Friday.
Wilmar Jordan Gil scored in the 63rd minute in a 1-0 win for Punjab.
Services shot into lead through a left-footer by Keralite Rahul Ramakrishnan in the 21st minute.
But Leipzig's Willi Orban levelled the score three minutes later with a header to set up a tense final few minutes that included a strike that hit the crossbar by Dani Olmo.
Goa won 1-0 with Sadaoui's 42nd minute goal proving to be the difference.
After 120 minutes of goalless action, both sides converted most of their kicks, but Kerala's substitute Sujith V R missed the decisive one.
Manipur will meet Goa in the second semifinal on Thursday (7 pm).