2013 (7) TMI 339 - AT - Central Excise

Natural Justice - CENVAT credit - on structural materials such as HR coils, MS angles, channels, plates, flats etc. which were claimed to be capital goods defined under Rule 2(a)(A) of the CENVAT Credit Rules, 2004 - Original authority deputed the Range Officer to the appellant s factory for inspection and report - On the basis of the Range Officer s verification report, the original authority held that the structural materials would neither qualify to be capital goods defined under Rule 2(a) nor to be inputs defined under Rule 2(k) of the CENVAT Credit Rules, 2004. It also relied upon the decision in Vandana Global Ltd. Vs. CCE, Raipur 2010decision in Vandana Global Ltd. Vs. CCE, Raipur 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) Held that - Original authority acted in violation of the principles of natural justice when it obtained a verification report from the Range Officer behind the back of the assessee and relied on it to decide the case against them - Set aside orders and allow this appeal by way of remand with a direction to the original authority to supply a copy of the verification report to the assessee and re-adjudicate the dispute in accordance with law and the principles of natural justice Decided in favor of Assessee.

Summary

Issues Involved:
1. Denial of CENVAT credit on structural materials as capital goods or inputs.
2. Violation of principles of natural justice by obtaining verification report without informing the assessee.
3. Failure of the appellate authority to address the grievance of natural justice violation.

Analysis:

Issue 1: Denial of CENVAT credit on structural materials
The appellant sought waiver and stay regarding the denied CENVAT credit amounting to Rs.2,78,095 for the period from July 2009 to March 2010. The dispute revolved around the classification of structural materials like HR coils, MS angles, channels, plates, flats, etc., as either capital goods or inputs under the CENVAT Credit Rules, 2004. The Department contended that these materials did not qualify as capital goods or inputs, leading to the denial of the CENVAT credit. The original authority, based on a verification report from the Range Officer, held against the appellant, citing the Tribunal's decision in Vandana Global Ltd. Vs. CCE, Raipur [2010(253) ELT 440 (Tri. LB)]. The appellant's grievance regarding the lack of access to the verification report was not addressed by the Commissioner (Appeals), leading to the appeal to the Tribunal.

Issue 2: Violation of principles of natural justice
The Tribunal identified a violation of natural justice principles when the original authority obtained a verification report from the Range Officer without informing the appellant. Relying on this report to decide against the appellant was deemed a breach of natural justice. The failure of the appellate authority to address this grievance further exacerbated the situation, as it implied an endorsement of the violation. Consequently, the Tribunal set aside the orders of the lower authorities and directed the original authority to provide a copy of the verification report to the appellant for a fair re-adjudication of the dispute in compliance with legal principles and natural justice.

Conclusion:
The judgment highlighted the importance of upholding natural justice principles in administrative proceedings, emphasizing the need for transparency and fairness in decision-making processes. By remanding the case for re-adjudication with proper access to relevant reports, the Tribunal ensured that the appellant's rights were protected and that the dispute would be resolved in accordance with the law.