2024 (8) TMI 1329 - AT - Central Excise

Commissioner's Rule Change Without Notice Violates Natural Justice in Tax Proceedings

STEEL AUTHORITY OF INDIA LTD Versus COMMISSIONER OF CENTRAL EXCISE & CGST-RAIPUR

CESTAT NEW DELHI held that the SCN was issued under Rule 57U, which had been omitted by the time of issuance. Neither party nor the Tribunal had ... Classification of goods - bins - to be classified under Tariff Sub-Heading 8474 90 or under Tariff Sub-Heading 7308 90? - Applicability of Rule 57U and Rule 57AH - HELD THAT:- The SCN was issued under Rule 57U and not under Rule 57AH. Admittedly, Rule 57U was omitted by the time the SCN was issued. This issue was never argued at any stage by either side nor had this Tribunal examined if Rule 57U existed at all while passing the final order remanding the matter to the Commissioner. Everyone including this Tribunal proceeded on the presumption that it had existed at that time. Even in the written submissions given to the Commissioner on 8.3.2021, the appellant did not raise this issue. After two years, on 26.4.2023, the Commissioner held a personal hearing when the appellant had appeared and made submissions. It does not appear that at any of these stages, the Commissioner had pointed out to the appellant that their case would be examined under Rule 57AH and not under 57U and had given then an opportunity to examine Rule 57AH and make submissions. Only in the discussions part of the impugned order, the Commissioner held that Rule 57U was already repealed and examined the case under Rule 57AH - there are no reason why the Commissioner did not point out that Rule 57U had not existed at the relevant time and therefore, he would be examining the case under Rule 57AH. Also, the new Rule 57AH increased the time limit from 6 months to one year and therefore, the liability of the appellant was increased in the impugned order behind the appellant’s back without ever giving the appellant even an opportunity to defend itself. The SCN was issued under Rule 57U which was not existing at that time and the appellant was never given an opportunity defend against or were even put to notice that their case will be examined under a new Rule 57AH which increased their liability. The impugned order is set aside - appeal allowed. Issues:- Classification of goods under Central Excise Tariff Act, 1985- Denial of MODVAT credit- Applicability of Rule 57U and Rule 57AH- Limitation period for recovery of MODVAT credit- Procedural fairness in adjudication processClassification of Goods:The case involved the classification of goods manufactured by the appellant under Chapters 72 and 73 of the Central Excise Tariff Act, 1985. The issue arose when it was found that certain goods supplied by another company were misclassified, affecting the appellant's eligibility for capital goods MODVAT credit.Denial of MODVAT Credit:The Directorate General of Central Excise Intelligence issued a Show Cause Notice proposing to deny MODVAT credit to the appellant based on the misclassification of goods. The denial of MODVAT credit was challenged by the appellant, leading to a series of appeals and orders by the Tribunal and High Court.Applicability of Rule 57U and Rule 57AH:The Commissioner's order, issued in pursuance of a Final Order by the Tribunal, raised concerns regarding the correct rule under which the denial of MODVAT credit should be considered. The Commissioner noted that Rule 57U, under which the SCN was issued, had been omitted and replaced by Rule 57AH, impacting the limitation period and the amount of credit to be denied.Limitation Period for Recovery of MODVAT Credit:The Commissioner relied on Rule 57AH, which provided for a limitation period of one year, to confirm the denial of MODVAT credit to the appellant. This decision was based on the understanding that half of the total credit taken fell within the one-year limitation period under Rule 57AH.Procedural Fairness in Adjudication Process:The Tribunal allowed the appeal filed by the appellant, setting aside the Commissioner's order due to procedural irregularities. The Tribunal found that the appellant was not given an opportunity to defend against the application of Rule 57AH, which increased their liability without proper notice or opportunity for submission. The lack of procedural fairness in the adjudication process led to the appeal being allowed and the impugned order being set aside in favor of the appellant.