Commissioner (Appeals) cannot Introduce and decide issues Beyond SCN Allegations in Appeals: CESTAT in KPMG Ltd Matter [Read Order]

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that the Commissioner ( Appeals ) cannot introduce and decide issues beyond the allegations mentioned in the Show Cause Notice (SCN) during appellate proceedings.

KPMG Advisory Services Pvt. Ltd., the appellant, is a consulting firm that was issued a show cause notice regarding its service tax liability. The dispute arose over whether the Integrated Goods and Services Tax (IGST) paid by the appellant in lieu of pending service tax dues was valid.

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The Commissioner (Appeals) ruled in favor of the appellant, confirming that the IGST payment was in order. The Commissioner (Appeals) went beyond the scope of the SCN by introducing a new issue that denied the appellant’s right to avail of CENVAT credit on the IGST paid.

Aggrieved by this finding, the appellant approached the CESTAT, arguing that the denial of CENVAT credit was never part of the SCN and so it should not have been adjudicated. The appellant’s counsel argued that the Commissioner (Appeals) overstepped his jurisdiction by introducing a new issue and that such an action violated the principles of natural justice.

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On the other hand, the revenue supported the findings of the Commissioner (Appeals) and argued that the denial of CENVAT credit was justified.

The single-member bench comprising P. Anjani Kumar (Technical Member) observed that the Commissioner (Appeals) was not free to set up a new case during the appellate proceedings, as the SCN serves as the foundation of tax disputes.

The tribunal observed that the issue of CENVAT credit was never alleged in the SCN and the appellant was deprived of the opportunity to defend itself against this charge. The tribunal ruled that the portion of the impugned order denying CENVAT credit was beyond the jurisdiction.

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The tribunal set aside the order but did not interfere with the rest of the Commissioner’s order. The appeal was allowed in part.

To Read the full text of the Order CLICK HERE

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