2018 (1) TMI 769 - HC - Central Excise

Requirement of Special Audit u/s 14AA of the CEA 1944 - transactional years 1999 to 2005 - Held that - the Commissioner/Respondent No.1 was under a legal obligation not only to comply with the twin obligations specified in the order dated 6th December, 2016 (supra) but, also to apply his mind with regard to the requirement of Section 14AA of the 1944 Act on the basis of the materials made available by the petitioner/assessee which gave ample evidence of the fact that there were no reasons to believe that the credit availed of had exceeded the outer limit - stay granted Let the matter next appear under the same heading Court Application at the top on 17th January, 2018.

Summary

Issues:
1. Validity of the order for special audit under Section 14AA of the Central Excise Act, 1944.
2. Compliance with principles of natural justice by the Commissioner.
3. Application of mind by the Commissioner in ordering the special audit.
4. Sufficiency of reasons provided in the impugned order.

Analysis:
1. The petitioner challenged an order dated 15th December, 2005, directing a special audit under Section 14AA of the Central Excise Act, 1944 for the years 1999 to 2005. The Hon'ble Court previously noted the Commissioner's obligations to pass a reasoned order and comply with natural justice principles. The petitioner contended that there was no basis to believe the duty credit exceeded normal limits for the years in question.

2. The Commissioner was required to consider the petitioner's submissions demonstrating no overutilization of credit. The petitioner argued that the Commissioner failed to apply his mind to the materials provided, as evidenced by the lack of reasoning in the impugned order dated 6th June, 2017. The petitioner highlighted the Commissioner's reliance on a High Court observation without adequate explanation.

3. The petitioner raised concerns regarding the Commissioner's decision to order a special audit based on perceived overutilization of credit without proper justification. The petitioner contended that the Commissioner's order lacked sufficient reasoning and failed to address the petitioner's submissions effectively.

4. Mr. Raghavan, representing the petitioner, emphasized that the impugned order did not meet the requirement for providing detailed reasons, as mandated by the previous court order. He requested the court to set aside the order and stay its implementation. The respondents were granted an opportunity to respond to the petitioner's arguments at the next hearing scheduled for 17th January, 2018.