2022 (3) TMI 104 - HC - Central Excise

CENVAT Credit - issue of only invoices without supply of any excisable goods - manufacturing capacity in place or not - Rule 4(2)(a) of the Cenvat Credit Rules, 2004 - non-consideration of report of the Registered Chartered Engineer - to provide proper reasoning and/or independent findings while disagreeing with the findings of the adjudicating authority - violation of principles of natural justice or not - availment of credit on the invoices issued by M/s. AESPL, when M/s. AESPL is not authorised to issue Central Excise Invoices under Rule 11 of the Central Excise Rules, 2002 - non-consideration of provisions of Rule 3, 4 and 7 of the Cenvat Credit Rules, 2002/Rules 3, 4 and 9 of the Cenvat Credit Rules, 2004? HELD THAT - The tribunal has not specifically recorded as to how and in what circumstances the decision of the tribunal in M/S JAI BALAJI INDUSTRIES LTD. VERSUS CCEX., BOLPUR 2019 (10) TMI 1353 - CESTAT KOLKATA in respect of another unit of the assessee covers the issue on hand. To be noted that the appeal was filed by the respondent/assessee on 6th April, 2010 and, obviously, on the said date the assessee could not have referred to the decision of the tribunal in respect of the assessee s another unit because the said decision was rendered by the tribunal almost nine years after the appeal was presented i.e., on 25th October, 2019. Thus, it is evidently clear that for the first time when the matter was heard before the tribunal, submission of the assessee was that the issue is covered by the order of the tribunal in Jai Balaji case. The duty cast upon the Court is to examine as to in what manner the decision covers the case before the concerned Court. The Court will be justified in following the earlier decision if the contesting respondent agrees to the same. However, in the impugned order we find that the revenue has not acceded or accepted that the decision dated 25th October, 2019 of the tribunal covers the present case. In such circumstances, it goes without saying that the tribunal has to record reasons as to how the decision would cover the case before it - the assessee prima facie focussed on factual issues as to how they have bona fide effected the purchase and utilised those products for manufacture of finished goods. Whether any substantial question of law arises for consideration? - HELD THAT - The tribunal has not given any reasons as to why the decision dated 25th October, 2019 would apply to the case on hand. Therefore, if we are called upon the adjudicate the correctness of the order, we would have to examine as to whether the Commissioner of Central Excise has rendered a proper finding in the order in original. This is not the scope of the appeal under Section 35G of the Act. This is one more reason as to why the order impugned has to be set aside and the matter to be remanded for fresh consideration. The matter is remanded to the tribunal for fresh consideration on merits and in accordance with law - Appeal allowed by way of remand.

Summary

Issues:
1. Interpretation of Cenvat Credit Rules, 2004 regarding invoices issued without supply of excisable goods.
2. Breach of natural justice by the Tribunal in not considering the report of the Registered Chartered Engineer.
3. Entitlement of the assessee to avail Cenvat Credit under Rule 4(2)(a) of the Cenvat Credit Rules, 2004.
4. Consideration of provisions of Rule 3, 4, and 7 of the Cenvat Credit Rules, 2004.
5. Validity of the Tribunal's order in light of findings of the adjudicating authority.

Analysis:
1. The revenue challenged the Tribunal's order allowing the appeal of the assessee under Section 35G of the Central Excise Act, 1944. The main issue was whether the assessee could avail Cenvat Credit under Rule 4(2)(a) of the Cenvat Credit Rules, 2004 based on invoices issued by M/s. AESPL, a company without manufacturing capacity. The Tribunal's decision was based on a previous order, but the Court found that the Tribunal did not adequately explain how the previous decision applied to the current case. The Court held that the Tribunal's order lacked reasoning and needed to be set aside for fresh consideration.

2. The Tribunal was also accused of breaching natural justice by not considering the report of the Registered Chartered Engineer and failing to provide proper reasoning while disagreeing with the adjudicating authority's findings. The Court emphasized the importance of recording reasons for decisions and found that the Tribunal's failure to do so justified setting aside the order for a fresh review.

3. The assessee argued that they had conducted due diligence before placing orders with M/s. AES and had produced documents as required by Rule 9 of the Rules. The Court noted that the assessee had presented factual details and evidence to support their case, but the Tribunal did not discuss these grounds adequately. The Court held that the Tribunal's failure to address the grounds raised in the appeal warranted setting aside the order.

4. The Court highlighted that the Tribunal did not provide reasons for how the decision in another case involving the assessee applied to the present case. This lack of explanation led the Court to conclude that the order needed to be remanded for fresh consideration. The Court clarified that in case of an open remand, all issues are left open for discussion before the Tribunal.

5. Ultimately, the Court allowed the appeal, set aside the Tribunal's order, and remanded the matter for fresh consideration. The substantial questions of law were left open for further examination by the Tribunal. The Court assured the assessee that they could raise all factual and legal issues during the fresh consideration before the Tribunal.