Order confirming issue beyond the Scope of Show Cause Notice is invalid: CESTAT sets aside Order Rejecting Cenvat Credit [Read Order]

The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that the order confirming the issue beyond the scope of show cause notice is invalid and set aside the order rejecting the CENVAT credit.

M/s Axis My India Ltd, the appellant challenged  the Order-in-Appeal passed by the Commissioner of Central Tax (Appeals), Raigad by which the Commissioner rejected the appeal on the ground that since the possibility of having provided exempted excise duty activities from the premises in issue cannot be ruled out the impugned credit would be ineligible to the appellant and in such situation under Rule 9(6) of CENVAT Credit Rules, 2004 the burden to prove the admissibility of the said CENVAT Credit shall lie upon the manufacturer or provider of output services taking such credit.

During the audit, it was observed that the appellant had availed ineligible CENVAT credit of service tax paid on rent services of their New Delhi Office and one of the objections of the audit was that the New Delhi office being an administrative set up there are chances that it may be connected with sale/marketing for both their exempted printing materials & dutiable services of ‘selling of space for advertisements in print media’.

Accordingly for recovering the said CENVAT credit amount of Rs.4,70,175/- for the period October 2014 to June 2017 alongwith interest and penalty, a show cause notice dated 9.7.2019 was issued to the appellant on various grounds. The show cause notice was confirmed along with interest and penalty.

On appeal being filed by the appellant, the Commissioner vide impugned order although decided the issues regarding nexus and registration in favour of the appellant but rejected the appeal by observing that there is the possibility of providing exempted excise duty activities from the said New Delhi premises and as the appellant has failed to discharge the burden of proof as mandated under Rule 9(6) ibid, therefore the CENVAT credit cannot be allowed to the appellant. 

The show cause notice has been issued based on presumption only and that’s why rule 9(5) ibid has been invoked in the show cause notice. It was submitted that the words ‘possible link’ and ‘possibility’ respectively have been used in the show cause notice as well as in the impugned order for denying the CENVAT credit to the appellant which is quite vague and only based on assumption and presumption a benefit cannot be denied.     

A single member bench of Mr Ajay Sharma, Member (Judicial) viewed that show cause notice is the foundation on which the department has to build up its case and the allegations in the show cause notice have to be specific as opposed to vague or lacking details.  The CENVAT credit has been denied by the Commissioner merely based on assumption and presumption which is arbitrary and not as per law.

It was settled that the authorities under the Act cannot travel beyond the show cause notice. Since the impugned order has travelled beyond the show cause notice and has been passed on new ground, the same is not sustainable. While allowing the appeal, the Tribunal set aside the impugned order.

To Read the full text of the Order CLICK HERE

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