2023 (2) TMI 943 - HC - Central Excise

Legal victory: Ex-parte order quashed. Principle of natural justice upheld. Fresh hearing ordered.

M/s MOHIT INDUSTRIES LTD. Versus UNION OF INDIA

M/s MOHIT INDUSTRIES LTD. Versus UNION OF INDIA - TMI Issues Involved:1. Breach of the principle of natural justice.2. Simultaneous availment of Notifications No. 29/2004-CE and 30/2004-CE.3. Legality of accumulated CENVAT credit utilization.4. Interpretation of Rule 11(3) of CENVAT Credit Rules, 2004.5. Validity of rebate claims on exported goods.Issue-wise Detailed Analysis:1. Breach of the Principle of Natural Justice:The petitioner argued that the Principal Commissioner (RA) did not provide an opportunity for a fresh hearing after the change of adjudicating authority, thereby violating the principle of natural justice. The court noted that the revisional authority relied on the petitioner's written submissions requesting to pass the order based on available documents and not requiring a personal hearing. However, the court emphasized that the authority which hears the matter should be the one to decide it. This serious lapse led the court to interfere with the order, quashing it and directing a fresh personal hearing.2. Simultaneous Availment of Notifications No. 29/2004-CE and 30/2004-CE:The petitioner maintained separate records under both notifications, as confirmed by the Commissioner (Appeals). The Board Circular No. 795/28/2004-CX dated 28.07.2004 allowed simultaneous availment of both notifications. The court found that the petitioner had been availing both notifications simultaneously and keeping separate records, thus complying with the requirements.3. Legality of Accumulated CENVAT Credit Utilization:The petitioner argued that the accumulated CENVAT credit legally availed before 09.07.2004 should be allowed to be carried forward and utilized. The court noted that the petitioner had utilized fresh CENVAT credit for the production of exported goods and debited the duty at the time of removal of goods from the factory. The revisional authority's allegation that the petitioner utilized the accumulated CENVAT credit lying in balance as of 01.03.2010 was found unsustainable.4. Interpretation of Rule 11(3) of CENVAT Credit Rules, 2004:The respondent contended that Rule 11(3) required the lapse of the entire balance of CENVAT credit once the assessee opted for full exemption under Notification No. 30/2004-CE. The court examined the detailed interpretation of sub-rules 3(i) and 3(ii) of Rule 11, which obligates the manufacturer to pay an amount equivalent to the CENVAT credit taken for inputs if opting for exemption from the whole duty of excise on the final product. The revisional authority interpreted that excess CENVAT credit lying in balance as of 09.07.2004 should have lapsed on 01.03.2007 when sub-rule (3) of Rule 11 was introduced.5. Validity of Rebate Claims on Exported Goods:The petitioner exported finished goods under Notification No. 29/2004 and filed rebate claims, which were rejected. The revisional authority held that the rebate claims were inadmissible as the duty was paid from lapsed CENVAT credit. The court noted that the petitioner had taken fresh credit for duty paid on raw materials and utilized it for the production of exported goods. The court found that the petitioner's rebate claims should not be held up, and interest should be provided for the delayed period of sanction of rebate claims.Conclusion:The court allowed the petition to the limited extent of quashing the ex-parte order of the revisional authority due to the breach of the principle of natural justice and directed a fresh personal hearing. The court emphasized that the authority which hears the matter should decide it, ensuring compliance with the principles of natural justice.