Tribunal finds natural justice violations in Cenvat credit case, remands for fair consideration

The Tribunal found violations of natural justice principles in the case involving alleged irregular Cenvat credit on components used in manufacturing DG sets. It criticized the adjudicating authority and Commissioner(Appeals) for not considering crucial documents and the Chartered Accountant certificate. Consequently, the Tribunal remanded the case for a fair consideration based on supporting documents, statutory registers, and the certificate, setting aside the impugned order and allowing the appeal for proper adjudication.

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Issues: Alleged irregular Cenvat credit on components used in manufacturing DG sets, shortage of diesel engines and alternators, validity of adjudication, consideration of submissions and documents, violation of principles of natural justice.

The case involved the appellant, a manufacturer of Diesel Generating sets, who procured components from reputable suppliers and availed Cenvat credit on materials used in manufacturing. Central Excise officers alleged irregular credit amounting to Rs. 28,79,250 on 99 diesel engines and 167 alternators during a factory visit. A show cause notice was issued for recovery. In the second round of litigation, the Tribunal noted discrepancies in the computation of shortages and errors in the opening balance of components. The appellant argued that every component had a serial number for identification, which was reflected in their invoices. They contended that the lower appellate authority failed to consider crucial documents and the Chartered Accountant certificate, emphasizing that their goods were sold to Government entities with proper documentation.

The Tribunal observed that all components had serial numbers for easy identification, which could be cross-referenced with invoices. It criticized the adjudicating authority for not considering the appellant's submissions, documents, and proceedings during de novo adjudication, deeming the order unsustainable under the statute. Similarly, the Commissioner(Appeals) was faulted for overlooking the appellant's appeal submissions and the Chartered Accountant's certificate provided as instructed during the hearing. Consequently, the Tribunal found violations of natural justice principles and remanded the case to the adjudicating authority for a fair consideration of the appellant's case based on supporting documents, statutory registers, and the Chartered Accountant's certificate, setting aside the impugned order and allowing the appeal by way of remand for proper adjudication.

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