2014 (4) TMI 1031 - HC - Central Excise

Denial of CENVAT Credit - Interest under Rule 14 of the Cenvat Credit Rules 2004 read with Section 11AB of the Central Excise Act, 1944 - Held that - while passing the OIO the adjudicating authority has denied the CENVAT credit to the petitioner on various other grounds for which no show cause notice was issued and no opportunity has been given to the petitioner. It appears that the show cause notice for denying the CENVAT credit was issued only on the ground that the petitioner has availed the credit of service tax on commission for sale of finished goods, which cannot be said to be relating to manufacturing activities but relating to sales activities (i.e. after manufacturing activities). However, while passing the OIO though the adjudicating authority has held that Business Auxilliary Service (BAS) on account of sales commission can be considered as Input Service within the definition of rule 2(I)(ii) of Cenvat Credit Rules, 2004 and the service tax paid on the said service is admissible as credit to the manufacturer, subject to certain conditions, the adjudicating authority has denied the Cenvat credit on altogether other grounds (mentioned in para 12.4 to 12.6 of the OIO) for which admittedly no show cause notice has been issued and no opportunity has been given to the petitioner. Under the circumstances, the OIO dated 31.03.2012 can be said to be in breach of principle of natural justice. Under the circumstances, the impugned OIO deserves to be quashed and set aside and the matter is remanded to the first adjudicating authority to consider the issue afresh in accordance with law and on merits - Decided in favour of assessee.

Summary

Issues:
1. Granting leave to amend by joining the Assistant Commissioner as a party respondent.
2. Challenging the impugned orders dated 08.05.2013 and 31.03.2012.
3. Show cause notice issued by the Adjudicating Authority.
4. Order passed by the Adjudicating Authority on wrongly availed Cenvat credit.
5. Appeal delay and dismissal by the Commissioner (Appeals).
6. Filing a Special Civil Application under Article 226 of the Constitution of India.
7. Legal arguments and submissions made by both parties.
8. Consideration of delay in filing the appeal and breach of natural justice.
9. Decision on the legality and validity of the OIO.

Analysis:
1. The judgment granted leave to amend by including the Assistant Commissioner as a party respondent.
2. The petitioner challenged the orders dated 08.05.2013 and 31.03.2012, seeking to quash and set aside the impugned orders.
3. A show cause notice dated 02.03.2010 was issued by the Adjudicating Authority, directing the petitioner to explain the wrongly availed Cenvat credit.
4. The Adjudicating Authority passed an order on 31.03.2012, demanding recovery of wrongly availed Cenvat credit along with interest and imposing a penalty.
5. The petitioner appealed the order, facing a delay of 222 days, leading to dismissal by the Commissioner (Appeals) as time-barred.
6. Subsequently, the petitioner filed a Special Civil Application under Article 226 of the Constitution of India, challenging the impugned orders.
7. Legal arguments were presented by both parties, highlighting errors in the Adjudicating Authority's order and the dismissal of the appeal.
8. The court considered the delay in filing the appeal and the breach of natural justice in passing the impugned order.
9. Ultimately, the judgment quashed and set aside the OIO dated 31.03.2012, remanding the matter to the Adjudicating Authority for a fresh consideration in accordance with the law and on merits.