SRI RAMA VILAS SERVICE LTD. Vs. CCE

JUDGEMENT

(1.) AFTER examining the records and hearing both sides, we are of the view that the appeal itself requires to be disposed of at this stage. Accordingly, after dismissing the stay application, we proceed to deal with the appeal. 3. The appellants are into the business of building body on chassis for motor vehicles. They are said to be temporarily out of this business after receiving the impugned order. Before that, they were taking CENVAT credit of the duty paid on chassis and other materials used for body -building and clearing the final product as complete motor vehicles falling under Heading 87.04 of the CETA Schedule on payment of duty of excise @ 16%. While so, they received a letter dated 15.2.2006 of the Superintendent of Central Excise, wherein it was stated that they were not entitled to take CENVAT credit as above without following the procedure stipulated under Notification No. 6/02 -CE dated 31.3.2002 in terms of Sl. No. 214 (iv) thereunder. The Superintendent's letter also contained an averment that the valuation of the goods should be governed by Section 4 of the Central Excise Act. The letter was issued with reference to ER -1 Returns filed by the party for the month of September 2005. It appears that the department did not want to pursue the matter for the said period with reference to Notification No. 6/2002 -CE ibid. However, the Superintendent issued another letter dated 24.3.2006 to the appellants, wherein it was stated that (1) CENVAT credit on chassis and other raw materials was not be taken where motor vehicles were cleared (to M/s Ashok Leyland Ltd.) at effective rate under Notification No. 6/2006 -CE dated 1.3.2006 (Sl. No. 41); (2) credit already taken on chassis was to be reversed and (3) the value adopted by the appellants for the motor vehicles supplied to the said company was not the transaction value envisaged under Section 4 of the Act. Against this letter of the Superintendent, the party preferred an appeal to the Commissioner (Appeals), contending mainly that the proposals of the nature made in the Superintendent's letter were not to be pursued without issue of show -cause notice. Learned Commissioner (Appeals) overruled this objection and passed the impugned order, wherein the appellants were directed to follow the Superintendent's instructions. 4. Learned Counsel submits that, without issue of requisite show -cause notice, it is not open to the department to reject the assessable value of the goods or to deny CENVAT credit on inputs or to disallow the benefit of the notification. A similar case which arose before this Bench is cited by counsel. It is submitted that, in that case, the matter was remanded to the Commissioner (Adjudicating Authority) for considering the claim of the party for the benefit of input -duty credit on chassis without exemption for final product under Notification No. 6/2002 -CE ibid vide Final Order Nos. 671 and 672/2006 dated 31.7.2006 in Appeal Nos. E/1071 and 1134/2005 (M/s. Automotive Coaches and Components Ld. v. CCE, Chennai). Learned SDR reiterates the findings recorded in the impugned order. 5. After considering the submissions, we find that the impugned order was passed in respect of fully built motor vehicles supplied by the appellants to M/s. Ashok Leyland Ltd. in the current financial year inasmuch as the Notification considered by the appellate authority is No. 6/2006 -CE dated 1.3.2006 effective for the fiscal year 2006 -07. The proposal made by the Superintendent in his earlier letter dated 15.2.2006, which was for the month of September 2005, was apparently dropped. The Superintendent's letter dated 24.3.2006 to the party contained three distinct proposals viz. (1) CENVAT credit not to be taken without complying with the condition stipulated in the Explanation to Sl. No. 41 in the Table annexed to Notification No. 6/06 -CE dated 1.3.2006; (2) the credit already taken on chassis to be reversed and (3) the value adopted for the fully built vehicles not to be accepted as transaction value under Section 4 of the Central Excise Act. We find that each of these proposals would call for issue of show -cause notice for giving the party an opportunity of contest in adjudicatory proceedings. Had such a show -cause notice been issued, the party would have had such opportunity and would have been in a position to challenge the adjudication in a proper statutory appeal to the Commissioner (Appeals). The impugned order passed by learned Commissioner (Appeals) is one which directed the party to follow the instructions contained in the Superintendent's letter dated 24.3.2006 as if the Superintendent had issued administrative instructions. Such an order which virtually treats the Superintendent's letter as an administrative order cannot be sustained for a moment. Ld. Commissioner (Appeals) would have done well to set aside the Superintendent's instructions and paved the way for quasi -judicial proceedings. In the case of M/s. Automotive Coaches and Components Ltd. (supra) cited by counsel, the assessee was luckier to have a show -cause notice and, in the facts of that case, we remanded the case to the Commissioner (Adjudicating Authority). In the present case, which, as already indicated, is grossly vitiated by negation of natural justice by the lower authorities to the appellants, we must be quick to set aside the impugned order to enable the department to follow the basic tenets of adjudication. 6. At this stage, we have a re -look at the Superintendent's letter dated 24.3.2006 and we have noted the three proposals made therein. We have already found that these proposals are in the realm of quasi -judicial proceedings. It is upto the proper officer of the department to make such proposals in a proper show -cause notice to be issued to the party. We are given to understand that, in the event of issue of such notice, the appellants would not like to contest it on limitation. 7. The impugned order is set aside and this appeal is allowed. The proper officer of Central Excise will be at liberty to issue requisite show -cause notice to the party and proceed in accordance with law and the principles of natural justice.