Natural justice in Cenvat credit disputes: disallowance set aside where no hearing or reasons were recorded.

A communication disallowing Cenvat credit could not stand where the record did not show that the assessee was given a hearing or an opportunity to defend the proposed disallowance. The action was taken suo motu and without recorded reasons, making it a non-speaking order and a violation of natural justice. The matter was therefore required to be sent back for fresh consideration by the Commissioner after proper notice and compliance with due process.

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Issues: Whether the letter dated 19-3-2007 disallowing Cenvat credit could be sustained when no opportunity of hearing was shown to have been given and the decision was not a speaking order.

Analysis: The communication did not disclose that the assessee had been afforded a hearing or an opportunity to defend the proposed disallowance of Cenvat credit. The decision was taken suo motu and without reasons, which amounted to violation of natural justice. In such circumstances, the matter required fresh examination by the Commissioner after issuing proper notice and following due process of law.

Conclusion: The impugned letter could not sustain the disallowance of Cenvat credit, and the matter was required to be remanded for fresh adjudication after hearing the assessee.

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