2012 (8) TMI 375 - AT - Service Tax

Violation of the principles of natural justice - denial of Cenvat Credit - order based on reports called from the range officer after hearing appellants - absence of opportunity to appellant to defend their case - Held that - It is undisputed that the reports was called for behind the back of appellant and that too after the issue was heard and arguments of appellants were closed. When it is clear that the appellant was not given a copy of the said report, and it was obtained after the personal hearing in the matter, we find that there is definitely a gross violation of the principles of natural justice. In our considered view, all the three impugned orders are liable to be set aside on this account.

Summary

Issues: Stay petitions for waiver of pre-deposit of Service Tax confirmed by the adjudicating authority along with interest and penalties; Violation of principles of natural justice in relying on a report without providing a copy to the appellants.

Analysis:
1. The Stay Petitions were filed seeking waiver of pre-deposit of Service Tax amounts confirmed by the adjudicating authority. The issue in all appeals was identical, leading to a common order for disposal.

2. The Tribunal, after considerable time spent on the Stay Petition hearing, found the issue to be narrow. Consequently, the Stay Petitions were allowed, and the appeals themselves were taken up for disposal.

3. The appellants had availed CENVAT Credit for vehicles used in providing output services. However, the adjudicating authority, without providing proper opportunity to defend, relied on reports from the range officer to deny the credit. The appellants argued a violation of natural justice principles and requested a remand for a fair hearing.

4. The Department argued that the appellants had wrongly classified services as mining services to avail CENVAT Credit. The verification report obtained by the adjudicating authority focused on this classification issue.

5. The Tribunal refrained from delving into the case's merits, noting a procedural flaw. The report relied upon by the adjudicating authority was obtained after the appellants' arguments were closed, violating natural justice principles.

6. It was held that relying on a report without providing a copy to the appellants for a fair opportunity to challenge it was a gross violation of natural justice. Therefore, the impugned orders were set aside, and the matters were remanded for fresh consideration with proper disclosure of reports and effective personal hearings.

7. The adjudicating authority was directed to reconsider the issue, granting all appellants a copy of the report for a fair process. No findings on the case's merits were recorded, leaving all issues open for the adjudicating authority to decide in fresh proceedings.

8. All appeals were allowed by way of remand, emphasizing the importance of upholding natural justice principles in adjudication processes.