Refund of unutilised Cenvat credit remanded for rehearing after natural justice breach; copy of appeal to be provided

Breach of natural justice occurred where the department's appeal memorandum was not supplied to the respondent, preventing defence against proposed denial of refund of unutilised Cenvat credit under Rule 5 (with reference to interplay with Rule 14); the Commissioner (Appeals) also proceeded to decide without parties present. The appellate order was set aside and the matter remanded for rehearing, with a direction to supply the appeal memorandum to the appellant and permit both sides to argue. No view was expressed on the merits; parties may contest issues afresh on re hearing.

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Issues: Whether the Order-in-Appeal dated 07.12.2016 passed by the Commissioner (Appeals) setting aside the Original Refund Sanctioning Authority's grant of refund should be sustained given that the appellant was not provided a copy of the departmental appeal memorandum and was not afforded opportunity to be heard.

Analysis: The appeal records show the department filed an appeal against the refund sanction and the Commissioner (Appeals) proceeded to decide the matter without appearance of either party. The appellant was not supplied with a copy of the departmental appeal memorandum and therefore had no opportunity to know or meet the grounds on which the refund was challenged. The Tribunal recognises the relevant legal framework governing refund of unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No.27/2012-C.E. (N.T.) dated 18.06.2012 and the issues concerning eligibility and nexus under Rules 2(k), 2(l) and procedural provisions such as Rule 14; however, having regard to the absence of procedural fairness and breach of principles of natural justice in the appellate proceedings, the Tribunal refrains from deciding the merits and directs a fresh hearing before the Commissioner (Appeals) after supplying the appellant with the departmental appeal memorandum.

Conclusion: The impugned Order-in-Appeal dated 07.12.2016 is set aside and the matter is remanded to the Commissioner (Appeals) for de novo hearing after providing the appellant a copy of the departmental appeal memorandum and an opportunity to be heard.

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