Essel Propack LTD. vs. The Union Of INDIA Through The Secretary Dept. Of Revenue Ministry Of Finance And Ors

Held

The Court held that the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) was not justified in passing the impugned order dated 28.08.2019, which dismissed the Petitioner's miscellaneous application and imposed costs. The Court also set aside the finding of fraud against the Petitioner recorded by CESTAT in its order dated 27.09.2018. The reasoning was that a finding of fraud requires specific allegations, proper notice to the party against whom fraud is alleged, an opportunity to be heard, and evidence demonstrating an intent to deceive. The Court found that CESTAT's conclusion of fraud was based on a hurried comparison of handwriting on two invoices, without sufficient procedural safeguards or proof of intent to deceive. The Petitioner was not given a proper opportunity to respond to the allegation of fraud. Therefore, the finding of fraud was not proved, but merely alleged. The Court noted that since the tax dues were settled under the amnesty scheme, its examination was confined to the finding of fraud and the rejection of the rectification application.

Facts

Essel Propack Limited (Petitioner) filed a writ petition challenging an order dated 28.08.2019 by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai. CESTAT had dismissed the Petitioner's Miscellaneous Application seeking recall of its earlier order dated 27.09.2018, which had dismissed the Petitioner's appeal and held that the Petitioner had made a mis-statement and practised fraud. The original dispute concerned the eligibility of CENVAT credit of service tax amounting to Rs.36,224.00 for the period October 2011 to July 2012, related to labour services for civil work and shifting of machinery. The adjudicating authority allowed credit of Rs.6,674.00, deeming Rs.29,550.00 inadmissible, and imposed penalty and interest. The Commissioner (Appeals) upheld this. CESTAT, however, dismissed the Petitioner's appeal, finding fraud based on two sample invoices submitted by the Petitioner, which allegedly had 'labour charges' inserted by a different handwriting.

Key Issues

1. Whether the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) was justified in holding that the Petitioner had practised fraud based on the submission of two sample invoices, thereby dismissing the Petitioner's appeal and subsequently rejecting its miscellaneous application seeking recall of the finding of fraud? Petitioner's Arguments: The Petitioner argued that the tax demand has been settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. Their grievance is limited to the finding of fraud recorded by CESTAT and the dismissal of their rectification application. They contend that the finding of fraud was reached hastily and without proper adherence to principles of natural justice, as they were not given adequate opportunity to respond to the allegation of fraud, and the comparison of handwriting was done without proper procedure. They rely on the principle that fraud must be specifically alleged, enquired into, and proven with intent to deceive. Revenue's Arguments: The judgment does not explicitly record arguments from the Revenue regarding the specific issue of fraud. However, the Revenue's representative at CESTAT had raised objections regarding the submission of invoices without permission and alleged subsequent insertion of 'labour charges', leading to the finding of fraud.