Hemnil Metal Processors Pvt. Ltd. vs Commissioner of C. Ex. and S.T.

This appeal challenges the order passed by the Tribunal on 15th January, 2013. From a perusal of the record and the impugned order, what we have found is that the present appellant-assessee filed an appeal challenging the order dated 3rd October, 2012 passed by the Commissioner of Central Excise (Appeals), Pune-I.

The Commissioner of Central Excise (Appeals) had, in the order passed by him concluded at a prima facie stage itself that the appellants are not entitled to a complete waiver of the condition of pre-deposit. There cannot be unconditional stay of recovery of the duty amount. In these circumstances, at the prima facie stage, though a detailed order has been passed, what the Commissioner of Central Excise (Appeals) held is that it would be reasonable to direct the appellant to deposit a sum of Rs. 24,00,000/- and to report compliance. Against this order, the matter was carried in appeal by the assessee before the Tribunal.

After hearing Mr. Sridharan, learned Senior Counsel, appearing in support of this appeal Mr. Jetley, learned counsel, appearing for the Revenue, we are of the opinion that the Tribunal should have restricted its prima facie conclusion to the point and particularly whether the condition of Rs. 24,00,000/- imposed by the Commissioner is reasonable and whether the Commissioner has exercised his discretion arbitrarily and capriciously. If the discretion has been exercised reasonably and properly, then, there was no occasion for the Tribunal to exercise its further appellate jurisdiction.

However, the Tribunal proceeded as if the Commissioner in his lengthy order has not addressed the merits of the case at all. The Tribunal, therefore, in the appeal of the assessee took pains to refer all the arguments of the assessee and in details. In para-5 and 5.1 of the order under challenge, the Tribunal has held as under:-

"5. We have carefully considered the submissions made by both the sides. As the lower appellate authority has not decided the issue on merits, we take up the appeal itself for consideration.

5.1 There is no dispute about the fact that the appellant availed exemption under Notification No. 8/2005-S.T., dated 1-3-2005 in respect of part of the job-work undertaken by him under the category of ''Business Auxiliary Service''. He was also discharging Service Tax liability in respect of job-work where he did not avail of the said exemption. In other words, the appellant was rendering both taxable services as well as exempted services. Therefore, he was required to maintain separate accounts for the common inputs and input services used in providing the output services which was not done. Further, there was a cap of 20% with respect to availment of input Service Tax credit under Rule 6(3)(c) of the CENVAT Credit Rules, 2004 which the appellant has violated. Therefore, it is clear that the appellant has contravened the provisions of sub-rule (1) and sub-rule (3) of Rule 6 of the CENVAT Credit Rules, 2004. The Hon''ble Apex Court, in the Ind-Swift case (cited supra) considered the interpretation of the word ''taken or utilised'' appearing in Rule 14 of the CENVAT Credit Rules, 2004 and held that there was no reason to distinguish between the two terms and interest liability will accrue from the date of wrong taking of the credit, even if it was not utilised. In the present case, the appellant was prohibited from utilizing the credit in excess of 20% under Rule 6(3)(c) and the appellant was prohibited from taking any credit under Rule 6(1) in respect of exempted services. Therefore, we are, prima facie, of the view that the appellant has not made out any case for complete waiver of pre-deposit of the dues adjudged. Inasmuch as the appellant has already paid an amount of Rs. 10,79,796/- towards interest on the wrong utilization of credit, we direct the appellant to pre-deposit an additional amount of Rs. 15 lakhs within a period of four weeks and report compliance before the Commissioner of Central Excise (Appeals), Pune by 22-2-2013. On such compliance, the lower appellate authority is directed to hear the matter on merits and pass an order after giving a reasonable opportunity to the appellant to make their submissions."

We enquired from Shri Jetley, how the Tribunal''s findings, even though rendered in an appeal directed against an interlocutory order, would not bind the parties in the pending appeal before the Commissioner. Mr. Jetley was unable to justify the exercise undertaken by the Tribunal.

We are of the opinion that the Tribunal should not have gone into the entire details or the merits of the controversy in such particulars possibly highlighted. Even if, the Tribunal has rendered a conclusion on the merits that we do not find to have been adequately clarified. The only submission in these two paragraphs which indicates that the Tribunal has taken a prima facie view is that the appellant has not made out any case for complete waiver of pre-deposit of the dues adjudged, that prior thereto, observations have been made and with regard to the applicability and contravention of the provisions of sub-rule (1) and sub-rule (3) of Rule 6 of the Cenvat Credit Rules, 2004. In such circumstances, we are of the opinion that the Tribunal has failed to exercise its jurisdiction in accordance with law. The impugned order is quashed and set aside. The appeal preferred by the assessee is restored to the file of the Tribunal for being heard afresh in accordance with law. Even if, detailed submissions are made by both the sides before the Tribunal, we would expect the Tribunal not to render a conclusive finding and opinion on the merits of the matter namely the pending appeal before the Commissioner. The Tribunal may refer to the arguments and some of the judgments which may be brought to its notice but we would expect it to be cautious and careful in not expressing any final opinion thereon. The Tribunal should confine its exercise to consideration of the application made before the Commissioner and whether there is any material brought before the Tribunal in support of a case of complete waiver of pre-deposit and unconditional stay of recovery.

All contentions in that regard of both sides are kept open. We clarify that while deciding the matter afresh, the Tribunal should not be influenced by any of the observations and findings in the impugned order. The appeal is allowed in the aforesaid terms with no orders as to costs.