Refund for Unutilized CENVAT Credit Rejected without Proper Notice: CESTAT Orders Re-Examination Citing Violation of Natural Justice [Read Order]

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that refund claims cannot be dismissed without issuing a proper show-cause notice or allowing the appellant an opportunity to present alleged deficiencies.

Mylan Laboratories Limited, the appellant, is a 100% Export Oriented Unit ( EOU ) engaged in the manufacture of pharmaceutical products under Chapter 30 of the Central Excise Tariff Act, 1985. The appellant filed refund claims for CENVAT credit amounting to Rs. 18,94,660, Rs. 64,69,769, and Rs. 11,59,354 for the periods October-December 2013, July-September 2013, and April-June 2013, respectively.

The department rejected the refund claims without issuing a show cause notice or prior communication regarding deficiencies in the claims. On appeal, the Commissioner of Central Excise (Appeals) upheld the rejection citing reasons such as the absence of valid documents, ineligible services, improper service tax documents, and time-barred claims. Aggrieved by the Commissioner’s order, the appellant approached the CESTAT.

Simplify Tax Settlements with Vivad se Vishwas Insights - Click here to Register

The appellant argued that the rejection violated the principles of natural justice as no opportunity was provided to present alleged deficiencies or respond to the grounds of rejection. The appellant’s counsel argued that documents supporting the claims were submitted but were ignored by both the adjudicating and appellate authorities.

The appellant’s counsel relied on the tribunal ruling in the case of Mportal India Wireless Solutions Pvt. Ltd. v. CST, Bangalore, to argue that proper notice and evaluation are mandatory before rejecting refund claims.

The revenue counsel argued that the appellant failed to substantiate the refund claims with valid documents and did not meet the procedural requirements for a refund. It also argued that the appellant could not later raise issues of procedural lapses after filing the appeals.

The two-member bench comprising Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that the authorities had not adhered to the principles of natural justice. The tribunal explained that refund applicants must be allowed to present deficiencies and that rejecting claims without issuing show-cause notices or specifying missing documents was procedurally flawed.

Simplify Tax Settlements with Vivad se Vishwas Insights - Click here to Register

The tribunal explained that assessing the factual matrix, including verification of submitted documents and compliance with judicial precedents, all come under the adjudicating authority. It clarified that it was not the tribunal’s role to evaluate the substantive merits of the claims at this stage.

The tribunal set aside the orders of the adjudicating and appellate authorities, remanding the matter back to the original authority for fresh adjudication. The appeal was allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates