Centralized registration permits inter-unit CENVAT credit use, and demands cannot rest on grounds beyond the show cause notice.

Under centralized registration, a unit could use CENVAT credit of its non-SEZ unit to discharge the service tax liability attributable to the SEZ unit because neither the governing exemption notification nor the CENVAT Credit Rules prohibited such inter-unit utilisation. A common invoice series was not a statutory requirement; centralized billing or accounting was sufficient, and different invoice sequences did not negate centralized registration. The demand also could not be sustained on grounds not stated in the show cause notice, because adjudication and appeal cannot travel beyond the case originally put to the assessee. The demand was therefore set aside and relief granted.

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Issues: (i) Whether a unit operating under centralized registration could discharge the service tax liability of its SEZ unit by utilizing CENVAT credit of its non-SEZ unit, and whether the absence of a common invoicing series defeated centralized billing or accounting. (ii) Whether the adjudicating and appellate authorities were justified in sustaining the demand on grounds not stated in the show cause notice.

Issue (i): Whether a unit operating under centralized registration could discharge the service tax liability of its SEZ unit by utilizing CENVAT credit of its non-SEZ unit, and whether the absence of a common invoicing series defeated centralized billing or accounting.

Analysis: Section 93 of the Finance Act, 1994 and the exemption notification governing SEZ supplies did not impose any restriction requiring payment in cash or forbidding utilization of available CENVAT credit of another unit of the same assessee. The CENVAT Credit Rules, 2004 also did not prescribe that units under centralized registration must use an identical invoice series. Rule 4(2)(iii) of the Service Tax Rules, 1994 required centralized billing or centralized accounting, not uniform numbering of invoices. The trade notice relied upon only required a centralized billing or accounting system and a supporting write-up, which did not translate into a condition about matching invoice series. The record therefore did not support the conclusion that the assessee lacked centralized registration merely because the SEZ and non-SEZ units used different invoice sequences.

Conclusion: The assessee was entitled to utilize CENVAT credit of the non-SEZ unit for discharging the service tax liability attributable to the SEZ unit under centralized registration, and the absence of a common invoice series did not invalidate centralized billing or accounting.

Issue (ii): Whether the adjudicating and appellate authorities were justified in sustaining the demand on grounds not stated in the show cause notice.

Analysis: The demand had been proposed on the premise that CENVAT credit was impermissibly used by the SEZ unit, but the adjudication ultimately proceeded on a different footing, namely, that the centralized registration itself was invalid because the billing and accounting system was allegedly not centralized. The appellate authority further introduced a different reasoning based on SEZ Rules. Since the show cause notice is the foundation of the levy proceedings, the authorities could not enlarge the controversy beyond the notice or sustain the demand on fresh grounds not put to notice. The impugned demand therefore suffered from a jurisdictional and procedural infirmity.

Conclusion: The authorities were not justified in sustaining the demand on grounds beyond the show cause notice, and the confirmation of demand could not be sustained.

Final Conclusion: The demand was set aside and the assessee obtained relief in the appeal.

Ratio Decidendi: Where the governing notification and credit rules do not prohibit inter-unit utilization of available CENVAT credit under centralized registration, a demand cannot rest on a supposed requirement of identical invoice series or on grounds introduced for the first time outside the show cause notice.

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