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Show Cause Notice is the foundation in the matter of levy and recovery of duty, penalty and interest and therefore demand cannot be confirmed on the grounds which are not raised in the Show Cause Notice.
Facts
The assessee availed CENVAT credit of service tax paid under reverse charge u/s. 66A and also on certain goods. In the Show Cause Notice, the department denied the credit on two grounds viz. (a) service tax paid under section 66A was not allowed by rule 3 of the CENVAT Credit Rules, 2004 – [CCR] and (b) Credit availed and utilized before actual installation of the capital goods was irregular. The Tribunal decided the matter in favour of the assessee holding that both the grounds were untenable. Before High Court the Department contended that Tribunal did not decide the eligibility of CENVAT credit in as much as whether the services in dispute would qualify as “input service” or as the case may be qualify as ‘capital goods’ used for providing output service i.e. port services.
Held
The Court held that, the issue as to eligibility of CENVAT credit in terms of utilisation of input services or capital goods for providing output services did not find place in show cause notice. The Court relied upon decisions of Supreme Court in the case of CCE vs. Ballarpur Industries Ltd. [2007] 11 STT 6 and of CCE vs. Gas Authority of India Ltd. 2008 taxmann.com 847, for the proposition that the show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest. Accordingly, department’s appeal was dismissed for the reason that it sought to challenge the order passed by the Tribunal on grounds which were never subject matter of the show cause notice.
Note: Readers may also refer to decision of Delhi CESTAT in the case of Computer Sciences Corp. India (P) Ltd [2015] 63 taxmann.com 211 [Para 3] where Tribunal has taken similar view that where there is no allegation raised in the show cause notice as to the total amount available as unutilized credit in the account of the appellants, it was not proper for the Commissioner (Appeals) to direct to check and verify or recompute the total credit available as unutilized credit.
