CENVAT Credit Denied on Endorsed Bills of Entry without Hearing: CESTAT Remands Matter to Assistant Commissioner [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has remanded a matter back to the Assistant Commissioner after finding that CENVAT credit was denied on endorsed Bills of Entry without granting a hearing to the assessee, violating principles of natural justice.

M/s. Eversendai Constructions Pvt. Ltd., the appellant, is a structural fabrication company, which had entered into a tripartite agreement with Forum Projects Pvt. Ltd. and Larsen & Toubro Ltd. (L&T) for fabrication and erection of steel structures used in a high-rise residential project titled “Atmosphere” at Kolkata.

Under the agreement, the appellant received steel inputs supplied by Forum Projects and L&T on a free-issue basis, supported by original duty-paying documents Bills of Entry and excise invoices endorsed in their favour.

On receiving the goods, the appellant sought permission from the jurisdictional Assistant Commissioner of Central Excise to avail CENVAT credit amounting to ₹1.43 crore (comprising ₹1.19 crore on imported steel and ₹24 lakh on indigenous inputs).

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However, by letter dated 1 August 2014, the Assistant Commissioner rejected the request, stating that endorsed invoices were not valid documents under the CENVAT Credit Rules, 2004, and warned that if credit was taken, recovery action would follow. No show cause notice or opportunity of hearing was provided.

The assessee subsequently appealed to the Commissioner (Appeals), who upheld the rejection on grounds of both maintainability and merits, prompting the present appeal before the Tribunal.

Arguing on behalf of Eversendai, counsel submitted that the denial of credit through a letter without due process amounted to an appealable order and that credit was admissible on endorsed Bills of Entry, especially since the genuineness of the transaction and receipt of goods was undisputed.

The counsel relied on precedents including Union of India v. Marmagoa Steel Ltd. (2008), Chokkaiyan Karthikeyan & Co. v. CCE (2011), and Uni Cast Pvt. Ltd. v. CCE (2016), to contend that procedural lapses should not override substantive entitlement.

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The Tribunal, comprising Judicial Member P. Dinesha and Technical Member M. Ajit Kumar, observed that the Assistant Commissioner’s letter effectively denied CENVAT credit, making the appeal maintainable.

The Bench criticized both lower authorities for failing to afford the appellant a fair hearing or to examine the case on merits, terming the omission a “serious lapse resulting in miscarriage of justice.”

The CESTAT noted that the Commissioner (Appeals) should have either remanded the matter or sought a report instead of deciding the issue substantively without factual verification.

While setting aside the impugned order, the Tribunal directed the Assistant Commissioner to reconsider the appellant’s request dated 2 April 2014, verify all supporting documents, and pass a reasoned, speaking order after granting a reasonable opportunity of hearing. The appeal was accordingly disposed of by way of remand, with all issues left open for fresh adjudication.

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