2024 (8) TMI 152 - AT - Central Excise

Refund of accumulated CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 read with notification 27/2012-CE (NT) dated 18.6.2012 - although the claims were sanctioned after being verified by the Range Officer and also by the refund Sanctioning Authority, Revenue s appeal was preferred based on the Post-Audit report without furnishing a copy of the same to the Appellants, which amounts to violation of natural justice. HELD THAT - The Commissioner, Appeals has forwarded the appeal memorandum EA-2 filed by revenue to the appellant and granted personal hearing. It s not clear whether the Audit note was enclosed along with the appeal memorandum or whether the allegations in the note were substantially a part of the appeal filed. However, it is felt that the appellant cannot demand a copy of the post-audit note which is an internal document of the department. The department is free to use the said note in its entirety or only in part as is felt necessary for framing its appeal. No violation of natural justice is done even if the post-audit note of the department which is a correspondence between one wing of the department and another is not supplied to the appellant. The appellant is only required to meet the averments made in the appeal arising from within the issues before the Original Authority. A plain reading of the second proviso to Section 35A(3) of the CEA 1944 shows that if the Commissioner (Appeals) is of opinion that any duty of excise has been erroneously refunded, no order requiring the appellant to pay any duty erroneously refunded shall be passed unless the appellant is given notice within the time-limit specified in Section 11A to show cause against the proposed order. It is found that both the issues, which are a mixed question of fact and law, were not taken up before the Ld. Commissioner Appeals. The Appellant did not file any cross-objections to the appeals nor did they appear for a personal hearing on any of the three dates given to them. The Tribunal has an inherent power, indeed a duty, to prevent the right of appeal being abused by an appellant who keeps back till the stage of appeal, points of law or fact which he could have raised before the lower authority, without showing any reason and thus places the other side at a disadvantage - due to the non-joining of the appellant in the appeal proceedings, the factual position relating to the audit note and the alleged non-issue of SCN or the view of the Commissioner Appeals on these legal issues is not available before me. In the circumstances of this case and in the interest of justice the matter merits to be remanded. The matter remanded back to the Ld. Commissioner Appeals for a decision afresh - appeal disposed off by way of remand.

Summary

Issues:
Appeal against recovery of refunded CENVAT credit due to procedural infirmities.

Analysis:
The case involved appeals arising from a common order passed by the Commissioner of Central Excise (Appeals), Trichy, related to the recovery of refunded CENVAT credit by the Revenue. The appellant, a manufacturer and exporter of insecticide bed nets, claimed refund under Rule 5 of CENVAT Credit Rules, 2004. The refund claims were initially allowed but were later challenged by the Revenue citing procedural issues. The main contention was that the Revenue based its appeal on a post-audit report without providing a copy to the appellant, violating principles of natural justice. The appellant argued that a show cause notice should have been issued before the proposed order, as required under the law.

The appellant emphasized that substantial benefits should not be denied due to procedural irregularities. They contended that the claims were verified before sanction, and the Revenue's reliance on the post-audit report without sharing it with the appellant was unjust. The appellant cited legal precedents to support their argument, highlighting the need for due process and the issuance of a show cause notice before recovering any ineligible CENVAT credit. The appellant also pointed out that the Commissioner of Appeals did not follow the necessary procedures, such as issuing a notice to show cause against the proposed order.

The Tribunal noted that the Revenue's appeal was based on a post-audit report that was not shared with the appellant, raising concerns about the violation of natural justice. However, the Tribunal clarified that the appellant may not necessarily be entitled to a copy of the internal audit note. The Tribunal also highlighted the legal provisions requiring the issuance of a show cause notice before recovering erroneously refunded duties.

Ultimately, the Tribunal found that the issues raised were a mix of fact and law and had not been adequately addressed by the Commissioner of Appeals. Due to the appellant's absence during the appeal proceedings, the Tribunal decided to set aside the impugned order and remand the matter back to the Commissioner of Appeals for a fresh decision. The Tribunal emphasized the importance of following principles of natural justice and providing a fair opportunity for the appellant to present their case. The lower authority was instructed to complete the process within ninety days of the Tribunal's order.