2016 (1) TMI 1180 - AT - Central Excise

CENVAT credit - structural items treating them as capital goods - Held that - it is seen that department has not issued any show-cause notice proposing to deny the credit taken on MS items. The appellants reversed the credit pursuant to a letter issued by Range Officer. The same was reversed under protest and thereafter they filed a refund claim. A show-cause notice was then issued proposing to reject the refund claim. It is seen that appellants did not file any reply to this show-cause notice, explaining the use of MS items. The adjudicating authority is seen to have passed the order-in-original that credit is not admissible basing on available records. In such a situation, I am of the view that it is a fit case for remand. The appellant is to be given a chance to file reply and substantiate their contention that credit has been rightly availed on the MS items - appeal allowed by way of remand.

Summary

Issues:
1. Admissibility of CENVAT credit on MS items.
2. Rejection of refund claim without issuance of show-cause notice.
3. Need for remand for de novo adjudication.

Analysis:

Admissibility of CENVAT credit on MS items:
The appellants, engaged in manufacturing MS ingots and TMT bars, availed CENVAT credit facility. The Range Officer directed them to pay back an amount for wrongly availed credit on structural items treated as capital goods. The appellants reversed the credit under protest, claiming it was admissible. However, no show-cause notice was issued initially. The department rejected their refund claim without a proper explanation. The consultant for the appellants argued that the MS items were used for capital goods and credit was rightfully taken. The department's failure to object earlier was highlighted. The Tribunal found that a show-cause notice was necessary to deny the credit and remanded the matter for further adjudication.

Rejection of refund claim without issuance of show-cause notice:
The department did not issue a show-cause notice challenging the credit taken on MS items initially. The appellants reversed the credit based on a letter from the Range Officer and filed a refund claim. Subsequently, a show-cause notice was issued to reject the refund claim. The appellants did not respond to this notice, leading to the rejection of their claim. The Tribunal emphasized the importance of a show-cause notice before denying credit and ordered a remand for a fresh adjudication.

Need for remand for de novo adjudication:
Considering the absence of a show-cause notice challenging the credit on MS items and the appellants' failure to respond to the subsequent notice, the Tribunal deemed it appropriate to remand the matter for de novo adjudication. The adjudicating authority was directed to allow the appellants an opportunity to present their case and substantiate the admissibility of the credit based on relevant judgments. The Tribunal allowed the appeal by way of remand, emphasizing the importance of due process in such matters.