2009 (10) TMI 379 - AT - Central Excise

Delegation by adjudicating authority- The appellants are engaged in manufacture of Ceramic tiles having their units located in the State of Rajasthan and Uttar Pradesh. They are having their corporate office at New Delhi and it is their case that they used to take input service credit on the strength of distribution invoices raised by their corporate office in respect of advertising services, commission agency services, house keeping services, manpower recruitment services, AMC services, security services, exhibition services etc. and used to distribute such expenses between Gailpur plant arid Sikanderabad plant in the ratio of 56% arid 44% respectively. On allegation that the appellants had wrongly availed the Cenvat credit amounting to Rs.60,62,680/- during the period 2006-2007 on the services used exclusively for the exempted goods, show cause notice came to be issued and matter being contested, the same was disposed off by the impugned order. Held that- The Commissioner who was the Adjudicating Authority had, to analysis of the records by himself in order to fix the duty liability upon the assessee and he could not have delegated this function to his subordinate. Even assuming that the investigation could have been done through his subordinate, it was the duty of the adjudicating authority to arrive at a correct finding on the material issue on the basis of analysis of the records and all the materials placed before him and not to decide solely on the basis of the observation by his subordinate. Being so, the impugned order cannot be sustained. For the reasons stated above, the impugned order is set aside and the matter is remanded to the Commissioner who shall decide the matter afresh in accordance with the provisions of law. The appeal is disposed off in the above terms.

Summary

Issues:
Challenging the impugned order based on various grounds, failure to segregate input services for manufacturing and trading activities, wrongful availing of Cenvat credit, proper investigation by Assistant Commissioner, delegation of duty by Adjudicating Authority.

Analysis:
The appellants, engaged in manufacturing ceramic tiles, challenged the impugned order primarily on the ground that the Commissioner disposed of the matter by relying solely on the conclusions drawn by the Assistant Commissioner without considering the points raised by the appellant. The issue revolved around the failure to segregate input services used exclusively for manufacturing activities from those used for trading activities. The appellants claimed to distribute expenses between their plants based on distribution invoices from their corporate office. Allegations of wrongly availing Cenvat credit amounting to Rs.60,62,680 during 2006-2007 on services used for exempted goods led to a show cause notice. The appellants produced a certificate by a Chartered Accountant to support their contention, but the Assistant Commissioner, without proper investigation or calling for records, concluded that a significant amount of Cenvat credit was unlawfully availed. The Adjudicating Authority then sought to disallow a portion of the credit based on this observation.

The impugned order revealed that the Commissioner referred the matter to the Assistant Commissioner to verify the appellants' contentions, but it did not specify the nature or extent of the investigation conducted. The appellants argued that no records were ever requested from them, and the Assistant Commissioner's conclusion lacked proper basis or detailed examination of records. The Commissioner's finding, based solely on the Assistant Commissioner's observation, failed to provide clarity on the records examined or the process followed. It was noted that the Adjudicating Authority should have conducted a thorough analysis of the records and materials before arriving at a decision, rather than delegating this responsibility. Consequently, the impugned order was set aside, and the matter was remanded to the Commissioner for a fresh decision in compliance with the law.

In conclusion, the judgment highlighted the importance of a comprehensive and independent analysis by the Adjudicating Authority, emphasizing the need for proper investigation and evaluation of records before reaching a decision on matters of duty liability.