2022 (1) TMI 1342 - HC - Central Excise

Restoration of CENVAT Credit/Input tax credit - lack of opportunity given by the Tribunal when the Tribunal had taken up an issue of law suo moto, which was also not the case of the Respondents before the Tribunal and the Appellant had no opportunity to deal with the same. Whether the Tribunal could have given an opportunity to the parties before coming to the conclusion that in the event refund of service tax was not due, the Appellant was entitled to restoration of Cenvat Credit/ Input Tax Credit for transition under section 140 of the Central Goods Services Tax Act, 2017 and when this case was not put before the Tribunal by either of the parties whether remand to the Tribunal on this count is necessary? HELD THAT - From the facts and the arguments before the Tribunal and the reasoning given by the Tribunal, it is clear that the ground on which the Tribunal has remanded the proceeding was neither the case of the Appellant nor of the Respondent nor any opportunity was given to the parties to meet this case. This assertion of the learned counsel for the Appellant is not denied by the learned counsel for the Respondent. There is a consensus that a new ground is made out by the Tribunal while passing the impugned order. The grievance of the Appellant, that when on the completely new ground order was to be passed then the Appellant should have been given an opportunity of being heard, is not merit-less. In view of the admitted position that the ground on which the Tribunal has passed the impugned order was not the case of the Appellant or the Respondent and both were not given an opportunity of hearing, there are no option but to set aside the impugned order and restore the matters to the file of the Tribunal to decide it as per law. The issue is answered in favour of the Appellant - appeal allowed.

Summary

Issues:
Challenge to Final Order by Appellant under Central Excise Act, 1994; Refund applications rejected; Appeal against Order-in-Original; Refund granted and challenged by Respondent; Lack of opportunity given by Tribunal; Grounds for remand not raised by parties.

Analysis:
1. The Appellant challenged the Final Order passed by the Customs, Excise and Service Tax Appellate Tribunal under the Central Excise Act, 1994. The Appellant, a Private Limited Company engaged in port development, availed services for construction under exempt categories. Refund applications were filed for service tax paid, which were rejected initially.

2. The Appellant appealed the rejection before the Commissioner (Appeals), partially succeeding in obtaining a refund. Both the Appellant and Respondent further appealed the decision. The Tribunal dismissed the Respondent's stay application and granted the refund to the Appellant. However, the Respondent sought recovery and issued a show cause notice.

3. The primary grievance of the Appellant was the lack of opportunity given by the Tribunal to address a new ground raised in the judgment, not presented by either party. The Appellant argued that the Tribunal's decision was based on a different premise not contended by the parties.

4. Before the Tribunal, the Appellant argued that the refund claimed was based on erroneous service tax payments to subcontractors, leading to a transfer of CENVAT Credit to GST Input Tax Credit Ledger. The Tribunal, citing a Supreme Court decision, rejected the refund applications but suggested restoring the input tax credit debited under GST laws.

5. The Tribunal's decision to remand the matter was based on grounds not raised by the parties, leading to the Appellant's lack of opportunity to respond. Consequently, the High Court set aside the Tribunal's order, emphasizing the importance of due process and remanded the matter for a fresh decision based on law.

6. The High Court found in favor of the Appellant, highlighting the procedural irregularity in the Tribunal's decision-making process. The judgment did not invalidate the Tribunal's reasoning but stressed the need for a fair hearing and adherence to legal procedures.

7. The High Court's ruling quashed the Tribunal's decision, allowing the appeal and remanding the case for reconsideration. The judgment clarified that the decision was solely based on procedural grounds and did not delve into the merits of the Tribunal's reasoning.

8. The conclusion emphasized the importance of fairness in legal proceedings and the need for parties to have an opportunity to address all grounds considered in a judgment. The interim application was disposed of in line with the appeal's resolution.