Case Law Details
EID Parry (India) Ltd. Vs Commissioner of Central Tax Visakhapatnam (CESTAT Hyderabad)
Introduction: In a recent case, EID Parry (India) Ltd. approached the CESTAT Hyderabad against a demand of service tax on the payment of insurance premium for a marine cargo policy. The issue revolved around the admissibility of Cenvat credit on the said premium. The CESTAT’s decision highlighted the lack of clarity in the show cause notice issued by the tax authorities.
Analysis: The show cause notice issued to the appellant did not provide detailed grounds for disallowing the Cenvat credit on the marine cargo insurance premium. The notice only quoted legal provisions without specifying the reasons for denying the credit based on the nexus to manufacturing or clearance activities.
The Commissioner (Appeals) and the Original Authority made contradictory arguments to establish the inadmissibility of the credit, but neither of them aligned with the grounds stated in the show cause notice. The CESTAT emphasized that authorities cannot decide a matter based on grounds not explicitly alleged in the show cause notice, as it would violate the principles of natural justice.
Citing a precedent case, the CESTAT observed that when a show cause notice lacks clarity in its grounds, it deprives the party of an effective opportunity to defend its case. Consequently, the CESTAT set aside the order of the Commissioner (Appeals) and allowed the appeal filed by EID Parry (India) Ltd.
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