Suo motu Recovery of Credit by Assessee during Litigation: CESTAT Quashes SCN and Remands Matter [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench, has recently, in an appeal filed before it, with regard to the suo motu recovery of credit by the assessee during litigation, quashed the SCN and remanded back the matter to the commissioner.

The aforesaid observation was made by the Ahmedabad CESTAT, when an appeal was filed before it against Order-In-Original No. 70/Commr. /Surat-II/2012 dated 18.10.2012, passed by the Commissioner, Customs & Central Excise, Surat.

Brief facts of the case are that during the course of audit of Appellant’s records, the internal audit party in the month of December 2008, had observed that the appellant had debited an amount of Rs. 1,60,97,664/- vide entry No. 2114, dated 30.09.97 in the RG23A Pt. II register voluntarily towards inadmissible modvat credit availed in respect of inadmissible capital goods i.e., structural channels and cement during the period prior to 1996- 97.

Subsequently, a show cause notice was issued to the appellant which was confirmed by the adjudicating authority vide Order-In- Original (OIO), dated 15.12.97. And being aggrieved by the said OIO, the Appellant had preferred an appeal against the OIO before the Commissioner (Appeals) and an Order-In-Appeal dated. 26.07.99, was passed that credit on pipes and tubes and wire and cables could be availed and credit on other items were disallowed.

The Appellant filed appeal before CESTAT against the said OIA, and the CESTAT vide order No. A/103/WZB/Ahdbad/06 dated. 13.11.2006, remanded the matter to the adjudicating authority for fresh consideration, in the light of law declared by the Tribunal in the case of Ispat Industries Ltd, after taking into consideration the factual position.

Pursuant to such remand order, an Order-In Original, dated 04.02.2008, was passed whereby Cenvat Credit of Rs. 11,28,052/- was denied to the appellant, while the balance credit of Rs. 65,98,211/- was held as admissible.

On the basis of OIO dated 04.02.2008, the appellant had taken credit of an amount of Rs. 65,98,211/- as Cenvat Credit vide their entry No. 81 dated. 27.03.2008 in their cenvat account, without filing any application for refund claim and without submitting any evidence to the effect that principle of unjust enrichment was followed in respect of restored credit amounting to Rs. 65,98,211/- as required under Section 11B of the Central Excise Act, 1944.

Accordingly, a Show cause notice was issued to them for recovery of the Suo motu credit, along with a proposal for penalty. And in adjudication, the demand was confirmed and the penalty of equal amount was imposed vide impugned order. And it is being aggrieved by the same, that the appellant has preferred the present appeal before the Ahmedabad CESTAT.

Hearing the opposing contentions of both sides as submitted by Mrugesh Pandya, the advocate for the Appellant, and by Shri. R.K. Agarwal, the Superintendent (AR) for the Respondent, and thereby perusing the materials available on record, the CESTAT observed:

“We have carefully considered the submissions made by both sides and perused the record.  We find that the short issue involved in the present case for determination is as to whether the appellant could Suo motu take the credit reversed during the litigation. However, we noticed that impugned order under challenge in this matter was passed on 18.10.2012 whereas as per the submission of the appellant that disputed amount of Rs. 65,98,211 was already refunded by the Assistant Commissioner, Central GST, Division –X, Vadodara-II, vide Order-In-Original No. 15/Dn-X/NNB/REFUND/19-20 dtd. 11.11.2019. The reversal of entry No. 1109 dtd. 25.03.2011 for filing appeal before the CESTAT in Appeal No. E/595 /2011 against the OIA No. BC/10/SURAT-II/2011 dtd. 08.03.2011 and Reversal of Entry No. 1109 dtd. 25.03.2011 disputed in the present appeal No. E/10141/2013 are same.”

“Under these circumstances, we consider it proper that the matter is remanded to the adjudicating authority to consider these aspects and to decide the matter a fresh after verifying the records /details of the appellant as claimed by them before this tribunal. We make it clear that we have not expressed any opinion as regards the merit or otherwise, hence we keep all the issues open. Further, we also direct the adjudicating authority to give appellant opportunity to present their case before taking a final decision”, the coram of Mr. Ramesh Nair, the Member (Judicial) and Mr. Raju, the Member (Technical) added.

Thus, the Ahmedabad CESTAT finally held:

“In the result, the impugned order is set aside and the matter is remanded back to Commissioner to decide the issue afresh after following the principles of natural justice.”

To Read the full text of the Order CLICK HERE

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