2017 (12) TMI 1428 - AT - Central Excise

100% EOU - CENVAT credit - whether Cenvat Credit taken by them can be disputed by the Revenue without issuing show cause notice under the provisions of Rule 14 of CCR, 2004 read with Section 73(i) of the Finance Act? - Held that - the eligibility to Cenvat Credit cannot be challenged without issue of SCN under the CCR as the provisions of the FA read with CCR provide for an issue of SCN under Rule 14 of CCR, 2004 read with Section 73(i) of the Finance Act or Section 11 A of the Excise Act - In the instant appeals admittedly no SCN have been issued for disallowance of Cenvat Credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether Cenvat Credit taken by the appellant assessee can be disputed by the Revenue without issuing a show cause notice under Rule 14 of CCR, 2004 read with Section 73(i) of the Finance Act.

Analysis:
The appellant, a 100% EOU providing offshore BPO services, availed Cenvat Credit on input services during a period where they couldn't utilize the credit due to the exempt nature of their export business. The appellant claimed a refund under Rule 5 of Cenvat Credit Rules, 2004. The refund applications were adjudicated in Orders-in-Original, disallowing credit on certain input services. The appellant's appeal before the Commissioner (Appeals) resulted in partial allowance of credit. The appellant, aggrieved by the decision, appealed to the Tribunal.

The appellant argued that the Department did not issue a show cause notice under Rule 14 of CCR, 2004, a prerequisite for disallowing Cenvat Credit. Citing a precedent case, the appellant contended that disallowance without such notice is unsustainable. The Tribunal referred to the precedent case of Free Scale Semi Conductor India Private Ltd, where it was held that disallowance without a show cause notice is not valid. Consequently, the Tribunal dismissed the Revenue's appeal, granting the appellant consequential benefits.

The Department's AR relied on the impugned orders, but the Tribunal found the issue to be settled by the precedent case. The Tribunal emphasized that challenging the eligibility for Cenvat Credit requires a show cause notice under the Cenvat Credit Rules and relevant provisions of the Finance Act. Since no show cause notice was issued in the present case, the Tribunal allowed all three appeals, setting aside the impugned orders. The appellant was granted consequential benefits, and the Adjudicating Authority was directed to provide the balance refund within 60 days with applicable interest.

This judgment clarifies the necessity of a show cause notice for challenging Cenvat Credit eligibility, as mandated by the Cenvat Credit Rules and relevant statutory provisions. The decision reaffirms the principle that procedural requirements must be met before disallowing credits, ensuring fairness and adherence to legal standards in tax matters.