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2021 (2) TMI 1104 - HC - Central ExciseValidity of Direction of the Tribunal to issue fresh SCN - demand beyond the scope of original SCN - power of Tribunal in making certain observations with regard to the validity of the CENVAT Credit Rules, 2004 qua the provisions of Section 37 of the Act - validity of proceeding to direct the original authority to issue a show cause notice to the appellant/assessee as regards its very entitlement for CENVAT credit - HELD THAT - The Tribunal appears to have suo motu taken up for consideration as to whether credit of service tax paid or payable on taxable service is allowable. The Tribunal suo motu proceeded to refer to Section 37(2), Section 11AB of the Act and made certain observations, which are in the nature of conclusive observations. The learned counsel for the assessee had argued that the assessee had been put on notice only regarding the issue whether the debit note is an eligible document or not and not on the question whether the impugned taxable service is an eligible input service or an ineligible input service. After noting this submission, the Tribunal while remanding the matter to the Original Authority following the decision in Pharmalab Process Equipments Pvt., Ltd. 2009 (4) TMI 142 - CESTAT AHMEDABAD , where it was held that debit notes issued by service providers contained details of service tax payable, description of taxable service, value of taxable service and registration number of service provider and name and address of service provider, which are the details required as per Rule 9(2) of the CCR, 2004 , issued one more direction to the Original Authority to issue a fresh show cause notice as to whether the impugned services are eligible input services or not. The assessee is aggrieved over such direction. Experts explain Debit notes to be a form of proof that one business has created a legitimate debit entry in the course of dealing with another business. This might occur when a purchaser returns materials to a supplier and needs to validate the reimbursed amount. In this case, the purchaser issues a debit note reflecting the accounting transaction. Debit notes and credit notes are almost always involved in business-to-business (B2B) transactions. They correspond to debit and credit entries in accounting logs, which further serve as proof of a prior business transaction. They may also be referred to as debit memos - A debit note or debit receipt is very similar to an invoice. The main difference is that invoices always show a sale, where debit notes and debit receipts reflect adjustments or returns on transactions that have already taken place. B2B transactions are typically based on an extension of credit, where a vendor sends a shipment to a company before getting paid, then invoices the company for the amount owed after delivery. Debits and credits are the accounting method used to keep track of these transactions. Debit notes can also be substituted for traditional invoices when a good or service is provided that is outside of the normal scope of business. This helps distinguish the transaction for both accounting departments, and also keeps the issuing company from creating a new type of invoice. The endeavour before us by the Revenue to sustain the argument is by referring to the powers of the Tribunal and that the Tribunal would be entitled to examine all issues, when it seized of an appeal arising out of an order in original or an order in appeal. This submission is not well founded in the facts and circumstances of this case for more than one reason. Firstly, the appeal was filed by the assessee and not the Revenue. The Revenue did not prefer any cross appeal/objection. Therefore, the assessee cannot be worse off in its own appeal before the Tribunal. Further, the Tribunal has not recorded as to who had advanced such submission. In the absence of any such observation, we are compelled to observe that it is suo motu exercise by the Tribunal, which is uncalled for and without jurisdiction. We say so because, the allegation in the show cause notice, which gives the cause of action for the entire matter, is that the assessee availed service tax input credit based on ineligible documents - Therefore, the Department can never proceed beyond such allegation and if done so, it would be wholly without jurisdiction. In other words, the Tribunal cannot sustain the case of the Revenue against an assessee on a ground not raised by the Revenue either in the show cause notice or in the order in original passed by it. Thus, the direction issued by the Tribunal to issue a fresh show cause notice to the appellant/assessee as to whether the impugned services are eligible input services or not is wholly without jurisdiction and the same is liable to be set aside - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the Tribunal exceeded its jurisdiction by addressing issues not raised in the Show Cause Notice. 2. Whether the Tribunal was correct in directing the adjudicating authority to examine the eligibility of credit under Section 37(2) of the Central Excise Act. 3. Whether the Tribunal was correct in holding that the adjudicating authority should examine the eligibility of input services under the Cenvat Credit Rules. 4. Whether the Tribunal was correct in remanding the matter for de novo adjudication on grounds not raised in the appeal. Detailed Analysis: Issue 1: Tribunal Exceeding Jurisdiction The primary issue was whether the Tribunal exceeded its jurisdiction by making observations beyond the scope of the Show Cause Notice. The Show Cause Notices issued to the appellant alleged the wrong availment of service tax credit based on debit notes, which were not recognized documents under Rule 9(1) of the CENVAT Credit Rules, 2004. The Tribunal, however, directed the original authority to issue a fresh show cause notice to examine the eligibility of the services as input services, which was not a contention raised by the Revenue in the Show Cause Notice. The court held that the Tribunal's actions were beyond its jurisdiction as it cannot sustain the case of the Revenue on grounds not raised in the Show Cause Notice or the adjudication order. Issue 2: Examination of Credit Eligibility under Section 37(2) The Tribunal directed the adjudicating authority to examine the eligibility of credit in light of Section 37(2) of the Central Excise Act, which was not an issue raised by the Revenue. The court found this direction to be without jurisdiction, as the Tribunal cannot introduce new grounds that were not part of the original proceedings. The court emphasized that the Tribunal's role is to adjudicate on issues raised by the parties and not to introduce new grounds suo motu. Issue 3: Eligibility of Input Services under CENVAT Credit Rules The Tribunal's decision to remand the matter to the original authority to verify whether the impugned services can be considered eligible input services under the CENVAT Credit Rules was also scrutinized. The court noted that the only issue in the appeal was whether a debit note is a valid document for availing CENVAT credit. By directing the adjudicating authority to examine the eligibility of input services, the Tribunal went beyond the scope of the appeal, which was limited to the validity of debit notes as eligible documents. Issue 4: Remanding for De Novo Adjudication The Tribunal's decision to remand the matter for de novo adjudication on grounds that were not part of the original Show Cause Notice was found to be incorrect. The court held that the Tribunal cannot remand the matter for fresh adjudication with new proposals that were not the subject matter of the appeal. This action was deemed to be beyond the Tribunal's jurisdiction and without legal basis. Conclusion: The court concluded that the Tribunal acted beyond its jurisdiction by addressing issues not raised in the Show Cause Notice and by directing the adjudicating authority to examine new grounds. The court set aside the Tribunal's directions to issue a fresh show cause notice regarding the eligibility of input services. The appeals were allowed, and the substantial questions of law were answered in favor of the appellant. The order of remand was sustained only to the extent of verifying the debit notes in terms of the decision in the case of Pharmalab Process Equipments Pvt. Ltd. No costs were awarded, and the connected miscellaneous petitions were closed.
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