1

AFR

HIGH COURT OF CHHATTISGARH AT BILASPUR

Reserved for orders on : 08.01.2026

Order passed on : 23.01.2026

TAXC No. 83 of 2019

1 - The Principal Commissioner Cgst And Central Excise, Gst Bhavan,

Dhamtari Road, Tikrapara, Raipur Chhattisgarh., District : Raipur,

Chhattisgarh

... Appellant

versus

1 - M/s Bharat Aluminium Company Limited Post Office Balco Nagar

Korba, Chhattisgarh - 495684., District : Korba, Chhattisgarh

... Respondent(s)

(Cause-title is taken from Case Information System)

For Appellant:Mr. Ashutosh Singh Kachhawaha,

Advocate assisted by Ms. Shruti

Parmar, Advocate

For Respondent:Mr. Bhishma Ahluwalia, Advocate

(Division Bench)

Hon’ble Shri Justice Sanjay S. Agrawal

Hon'ble Shri Justice Amitendra Kishore Prasad

CAV Judgment

Per; Amitendra Kishore Prasad, Judge

2

1.The Revenue has preferred the present appeal under Section 35-

G(1) of the Central Excise Act, 1944, being aggrieved by the

impugned Final Order No. A/50671/2019-EX(DB) dated

07.01.2019 (Annexure-A/1) passed by the Customs, Excise and

Service Tax Appellate Tribunal, Principal Bench, New Delhi

(hereinafter referred to as “CESTAT”), in Appeal No.

E/51058/2018 (Annexure-A/4), arising out of Order-in-Original No.

RPR/EXCUS/000/COM/024/2018 dated 30.01.2018 (Annexure-

A/3) passed by the Commissioner, Central Excise and Customs,

Raipur, Chhattisgarh.

2.Facts of the case, as projected, are that the M/s Bharat Aluminium

Company Limited, P.O. Balco Nagar, Korba, Chhattisgarh-495684

(hereinafter referred to as “the respondent/assessee”), holding

Central Excise Registration No. AAACB1290NXM002, is engaged

in the manufacture of aluminium and aluminium products

classifiable under Chapter 76 of the Central Excise Tariff Act,

1985. In the course of its manufacturing activities, the respondent

was availing CENVAT credit on inputs, capital goods and input

services in terms of the CENVAT Credit Rules, 2004. The

respondent was procuring coal from South Eastern Coalfields

Limited (SECL), a subsidiary of Coal India Limited, which coal

was used as an essential input in the manufacture of aluminium.

On the basis of intelligence gathered, the Department initiated

proceedings against SECL alleging undervaluation of coal

supplied to its customers by not including statutory levies such as

3

royalty, stowing excise duty, clean energy cess, transit fees and

other charges in the assessable value, despite such levies being

statutorily payable. Accordingly, a show cause notice was issued

to SECL, Bilaspur, demanding differential excise duty on the

alleged undervaluation of coal by invoking the extended period of

limitation on allegations of suppression of facts and proposing

imposition of penalty under Section 11AC of the Central Excise

Act, 1944. The Commissioner, Central Excise, Raipur, vide Order-

in-Original No. COMMISSIONER/RPR/CEX/37/2014 dated

29.09.2014 (Annexure-A/7), confirmed the demand of duty on

royalty, stowing excise duty and other statutory levies, along with

applicable interest and penalty under Section 11AC of the Act.

Being aggrieved, SECL preferred an appeal before CESTAT,

which was disposed of vide Final Order No. A/56448-56449/2017-

EX(DB) dated 04.09.2017 (Annexure-A/6). The Tribunal observed

that an identical issue was pending consideration before the

Hon’ble Supreme Court in Mineral Area Development Authority vs.

Steel Authority of India Ltd. and, therefore, disposed of the appeal

granting liberty to SECL to revive the matter after the final verdict

of the Hon’ble Supreme Court. Pursuant thereto, SECL paid the

differential excise duty under protest pertaining to royalty, stowing

excise duty, clean energy cess, transit fees and other charges.

After making such payment, SECL issued supplementary invoices

to its customers, including the respondent-assessee, in respect of

the differential duty so paid under protest on coal supplied earlier.

4

Thereafter, the Department alleged that the respondent had

availed CENVAT credit on the basis of the supplementary invoices

issued by SECL for the differential excise duty paid by it. It was

alleged that such availment of credit was barred under Rule 9(1)

(b) of the CENVAT Credit Rules, 2004, as the supplementary

invoices were issued on account of non-levy or short-levy of duty

arising out of suppression of facts by the supplier. Accordingly, a

show cause notice dated 20.03.2017 (Annexure-A/2) was issued

to the respondent proposing disallowance and recovery of

CENVAT credit amounting to Rs. 6,51,22,158/- along with interest

and imposition of penalty. The said notice was adjudicated by the

Commissioner, Central Excise and Customs, Raipur, who vide

Order-in-Original No. RPR/EXCUS/000/COM/024/2018 dated

30.01.2018 (Annexure-A/3), disallowed the CENVAT credit of

Rs. 6,51,22,158/-, ordered recovery thereof with interest and

imposed an equal amount of penalty on the respondent.

3.Aggrieved by the said Order-in-Original dated 30.01.2018, the

respondent preferred an appeal before CESTAT. The Tribunal,

vide the impugned Final Order No. A/50761/2019-EX(DB) dated

07.01.2019 (Annexure-A/1), allowed the appeal and set aside the

Order-in-Original. The Tribunal held that in identical matters it had

already been decided that there was no element of fraud,

collusion, wilful misstatement or suppression of facts with intent to

evade payment of duty on the part of SECL and, therefore, the

bar under Rule 9(1)(b) of the CENVAT Credit Rules, 2004 was not

5

attracted. Consequently, the respondent was held entitled to avail

CENVAT credit on the basis of the supplementary invoices. Being

aggrieved by the aforesaid impugned final order dated

07.01.2019, passed by the CESTAT, the Revenue has preferred

the present appeal before this Hon’ble Court under Section 35-

G(1) of the Central Excise Act, 1944, raising substantial questions

of law for consideration.

4.Learned counsel appearing on behalf of the appellant–Revenue

submits that the impugned final order passed by the learned

CESTAT is legally unsustainable, as the Tribunal has failed to

consider and adjudicate upon the core and determinative issue

involved in the present case, namely, the availability of CENVAT

credit on the strength of supplementary invoices in terms of Rule

9(1)(b) of the CENVAT Credit Rules, 2004, where a statutory bar

is expressly created. It is submitted that Rule 9(1)(b) of the

CENVAT Credit Rules, 2004 clearly provides that CENVAT credit

shall not be admissible on supplementary invoices where the

additional amount of duty has become recoverable from the

manufacturer or importer of inputs on account of non-levy or

short-levy by reason of fraud, collusion, wilful misstatement or

suppression of facts, or contravention of statutory provisions with

intent to evade payment of duty. The said provision squarely

applies to the facts of the present case. Learned counsel

contends that, in the present matter, the charges of suppression

of facts and intent to evade payment of duty were conclusively

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proved and confirmed against M/s South Eastern Coalfields

Limited (SECL), the supplier and issuer of the supplementary

invoices. The differential duty was paid by SECL only pursuant to

confirmation of demand by the adjudicating authority by invoking

the extended period of limitation and by imposing penalty under

Section 11AC of the Central Excise Act, 1944. Thus, the

foundational requirement for attracting the bar under Rule 9(1)(b)

stood fully satisfied. It is further submitted that the real issue

before the Tribunal was not whether there was any fraud or

suppression on the part of the respondent–assessee (BALCO),

but whether CENVAT credit could be availed when the

supplier/issuer of the supplementary invoices had paid duty on

account of fraud and suppression. The statutory bar under Rule

9(1)(b) operates with reference to the conduct of the supplier or

issuer of the supplementary invoice, and not the recipient of

inputs. This crucial legal position has been completely overlooked

by the Tribunal. Learned counsel submits that the Tribunal,

without discussing the detailed findings recorded by the

Commissioner in the Order-in-Original, has mechanically

concluded that there was no fraud or suppression on the part of

the respondent and, on that basis alone, allowed the CENVAT

credit. Such reasoning is wholly contrary to law and reflects a

misdirection in addressing the issue, rendering the impugned

order perverse. It is further argued that the impugned order is a

non-speaking and cryptic order, inasmuch as the Tribunal has

7

reversed a well-reasoned and detailed Order-in-Original without

meeting, analyzing or rebutting the specific findings recorded

therein, particularly those relating to confirmation of demand

against SECL, invocation of extended period, and imposition of

penalty under Section 11AC. The Tribunal was duty-bound to deal

with these findings before setting aside the Order-in-Original.

Learned counsel also submits that the Tribunal has erroneously

relied upon the pendency of an altogether different issue, namely,

whether royalty is a tax, which is pending consideration before the

Hon’ble Supreme Court. The said issue has no nexus with the

controversy involved in the present case, which solely concerns

the statutory embargo under Rule 9(1)(b) of the CENVAT Credit

Rules. Reliance on such pendency is therefore wholly

misconceived. It is further submitted that, in similar matters arising

out of identical facts, the Tribunal itself has adopted a contrary

approach. In the case of M/s Trimula Industries Ltd., Singrauli, the

Tribunal adjourned the matter sine die awaiting the verdict of the

Hon’ble Supreme Court, whereas in the present case, on the

same set of facts, the Tribunal has straightaway allowed the

credit. Such inconsistent treatment by the Tribunal demonstrates

arbitrariness and renders the impugned order unsustainable.

5.Learned counsel points out that the Department has already

challenged similar orders before this Court in the cases of M/s

UltraTech Cement Ltd., M/s Century Cement, and M/s Nalwa

Steel & Power Ltd., where identical questions of law are pending

8

adjudication. The impugned order, therefore, has wide

ramifications and warrants interference by this Court. It is lastly

submitted that the Commissioner, in the Order-in-Original, has

rightly relied upon statutory provisions, admissions of the

respondent’s authorised representative, and binding judicial

precedents to hold that CENVAT credit availed on supplementary

invoices issued pursuant to duty demands confirmed on grounds

of fraud and suppression is inadmissible. The Tribunal, without

dislodging these findings, could not have lawfully set aside the

Order-in-Original. In view of the aforesaid submissions, learned

counsel for the appellant–Revenue prays that the impugned Final

Order dated 07.01.2019 passed by the CESTAT be set aside and

the Order-in-Original dated 30.01.2018 passed by the

Commissioner be restored, as the Tribunal has committed a

manifest error of law in allowing the CENVAT credit in

contravention of Rule 9(1)(b) of the CENVAT Credit Rules, 2004.

6.Learned counsel appearing on behalf of the respondent–BALCO

submits that the learned Tribunal has rightly appreciated the facts

and law applicable to the present case and has correctly arrived

at the conclusion that the respondent was entitled to avail

CENVAT credit on the basis of supplementary invoices issued by

M/s South Eastern Coalfields Limited (SECL). It is submitted that

there is no violation of Rule 9(1)(b) of the CENVAT Credit Rules,

2004, and therefore the impugned order of the Tribunal calls for

no interference. It is submitted that the entire dispute revolves

9

around the denial of CENVAT credit availed by the respondent on

supplementary invoices issued by SECL towards payment of

differential Central Excise duty. The sole basis of the appellant–

Department for denying the credit is the alleged applicability of the

bar contained under Rule 9(1)(b) of the CENVAT Credit Rules,

2004. The said contention is misconceived and unsustainable in

law. Learned counsel submits that Rule 9 of the CENVAT Credit

Rules, 2004 prescribes the documents on the basis of which

CENVAT credit can be availed, and a supplementary invoice is

specifically recognized as a valid document for availing such

credit. Rule 9(1)(b) permits availment of CENVAT credit on

supplementary invoices except in a narrowly carved out situation,

namely, where the additional amount of duty becomes

recoverable from the manufacturer or importer by reason of fraud,

collusion, wilful misstatement, suppression of facts or

contravention of statutory provisions with intent to evade payment

of duty. It is further submitted that a plain and harmonious

reading of Rule 9(1)(b) makes it abundantly clear that the said

provision is attracted only when the ingredients analogous to

those required for invoking the extended period of limitation under

Section 11A of the Central Excise Act, 1944, including the

existence of mens rea or intent to evade duty, are clearly

established against the manufacturer issuing the supplementary

invoices. In the present case, the appellant–Department

proceeded against SECL on the issue of valuation of coal under

10

Section 4 of the Central Excise Act, 1944 by seeking inclusion of

royalty and other charges as additional consideration. The dispute

between the Department and SECL was purely interpretational

and legal in nature, concerning whether royalty and allied charges

formed part of assessable value for levy of excise duty. Learned

counsel submits that, contrary to the allegations of the appellant,

SECL had openly disclosed the collection of royalty and other

charges in its original invoices and had also declared that the

assessable value under Section 4 was less than the total amount

charged. Thus, there was complete transparency and no

suppression of facts or wilful misstatement on the part of SECL. It

is an admitted position that SECL had paid the entire differential

excise duty on 14.03.2013, even prior to issuance of the demand

notice dated 05.03.2014 by the Department. The subsequent

proceedings were only for adjudication of the legal issue relating

to valuation. This factual position itself demolishes the allegation

of intent to evade payment of duty. Learned counsel further

submits that the valuation issue was directly and substantially

dependent upon a complex and debatable question of law

pending consideration before the Constitution Bench of the

Hon’ble Supreme Court in Mineral Area Development Authority v.

Steel Authority of India Ltd., Civil Appeal No. 4056–4064 of 1999,

concerning the nature of royalty under the Mines and Minerals

(Development and Regulation) Act, 1957. At the relevant time,

there existed divergent views of the Hon’ble Supreme Court in

11

India Cements Ltd. v. State of Tamil Nadu and State of West

Bengal v. Kesoram Industries Ltd. on the nature of royalty. In view

of such conflicting judicial opinions, SECL, under a bona fide

belief, did not include royalty and ancillary levies in the

assessable value of coal for excise purposes. It is submitted that,

in order to avoid accrual of interest and without conceding liability,

SECL chose to pay the differential duty while contesting the issue

on merits. Such payment, made under protest and in the

backdrop of a pending constitutional and legal controversy, cannot

be equated with payment arising out of fraud, suppression or

wilful misstatement with intent to evade duty. Learned counsel

submits that the Order-in-Original dated 29.09.2014 passed

against SECL does not record any clear or conclusive finding

establishing intent to evade payment of duty, which is a sine qua

non for invoking Rule 9(1)(b). Mere confirmation of demand does

not automatically attract the statutory bar unless mens rea is

unequivocally established. It is well-settled law that where duty

becomes payable pursuant to resolution of conflicting judicial

views or interpretation of law, mens rea cannot be attributed to the

assessee. Consequently, allegations of fraud or suppression

cannot be sustained in such circumstances. Reliance in this

regard has been rightly placed on binding judicial precedents.

Learned counsel further submits that SECL being a Public Sector

Undertaking, allegations of fraud or intent to evade payment of

duty cannot be casually attributed in the absence of identification

12

of any beneficiary of such alleged fraud. Reliance is placed on the

judgment in CCE v. Rajasthan Renewable Energy Corporation

Ltd., 2018 (15) GSTL 661 (Raj), wherein it has been held that

mala fide intent cannot be readily presumed in the case of a PSU.

In view of the above, it is submitted that the differential duty paid

by SECL cannot be said to have been paid on account of fraud,

collusion, wilful misstatement or suppression of facts with intent to

evade duty. Consequently, the exception carved out under Rule

9(1)(b) is not attracted, and the respondent was fully entitled to

avail CENVAT credit on the supplementary invoices. Learned

counsel submits that the learned CESTAT has correctly

appreciated these aspects and, following consistent judicial

precedents, has rightly held that the respondent is entitled to

CENVAT credit on the supplementary invoices in question. The

impugned order is reasoned, legal and based on correct

interpretation of Rule 9(1)(b) of the CENVAT Credit Rules, 2004.

It is therefore submitted that no substantial question of law arises

for consideration in the present appeal. The appeal filed by the

appellant–Revenue is devoid of merit and is liable to be

dismissed, affirming the final order passed by the learned

CESTAT.

7.We have heard learned counsel appearing for the respective

parties at length and have carefully perused the entire record. The

present appeal was admitted on the following substantial question

of law:

13

“Whether the Customs, Excise and Service Tax

Appellate Tribunal was justified in allowing the

CENVAT credit availed on the invoices by the

respondent by recording a finding which is perverse

to the material available on record?”

8.In order to properly appreciate the rival contentions advanced on

behalf of the parties and to adjudicate upon the aforesaid

substantial question of law, it is necessary to examine the

statutory framework governing the issue. The controversy in the

present case essentially revolves around the interpretation and

applicability of Rule 9(1)(b) of the CENVAT Credit Rules, 2004,

which prescribes the circumstances under which CENVAT credit

may be availed on the basis of supplementary invoices and also

delineates the exceptions thereto. Accordingly, Rule 9(1)(b) of the

CENVAT Credit Rules, 2004, being germane and pivotal for

deciding the present appeal, is reproduced hereunder for ready

reference :

“RULE 9. Documents and accounts -

(1) The CENVAT credit shall be taken by

the manufacturer or the provider of

output service or input service

distributor, as the case may be, on the

basis of any of the following documents,

namely :-

(a) xxxxxx xxx

(b) a supplementary invoice, issued by a

manufacturer or importer of inputs or

14

capital goods in terms of the provisions

of Central Excise Rules, 2002 from his

factory or depot or from the premises of

the consignment agent of the said

manufacturer or importer or from any

other premises from where the goods

are sold by, or on behalf of, the said

manufacturer or importer, in case

additional amount of excise duties or

additional duty leviable under section 3

of the Customs Tariff Act, has been paid,

except where the additional amount of

duty became recoverable from the

manufacturer or importer of inputs or

capital goods on account of any non-

levy or short-levy by reason of fraud,

collusion or any wilful mis-statement or

suppression of facts or contravention of

any provisions of the Excise Act, or of

the Customs Act, 1962 (52 of 1962) or

the rules made thereunder with intent to

evade payment of duty.

Explanation. - For removal of doubts, it

is clarified that supplementary invoice

shall also include challan or any other

similar document evidencing payment of

additional amount of additional duty

leviable under section 3 of the Customs

Tariff Act; or

xxx xxx xxx”

9.Likewise Section 4(1) of the Central Excise Act, 1944 speaks as

under :

“4. Valuation of excisable goods for

purposes of charging of duty of

excise.---

xxx xxx xxx

xxx xxx xxx

(3) For the purposes of this section -

15

(a) "assessee", means the person who

is liable to pay the duty of excise under

this Act and includes his agent;

(b) persons shall be deemed to be

"related" if -

(i) they are inter-connected

undertakings;"

(ii) they are relatives;'

(iii) amongst them the buyer is a

relative and a distributor of the

assessee, or a sub-distributor of such

distributor; or

(iv) they are so associated that they

have interest, directly or indirectly, in

the business of each other.

Explanation. - In this clause -

(i) "inter-connected undertakings"

shall have the meaning assigned to it

in clause (g) of section 2 of the

Monopolies and Restrictive Trade

Practices Act, 1969 (54 of 1969); and

(ii) "relative" shall have the meaning

assigned to it in clause (41) of section

2 of the Companies Act, 1956 (1 of

1956);

(c) "place of removal" means -

(i) a factory or any other place or

premises of production or

manufacture of the excisable goods;

(ii) a warehouse or any other place

or premises wherein the excisable

goods have been permitted to be

deposited without [payment of duty;]

(iii) a depot, premises of a

consignment agent or any other

place or premises from where the

excisable goods are to be sold after

their clearance from the factory;]

16

from where such goods are

removed;

(d) "transaction value" means the price

actually paid or payable for the goods,

when sold, and includes in addition to

the amount charged as price, any

amount that the buyer is liable to pay to,

or on behalf of, the assessee, by reason

of, or in connection with the sale,

whether payable at the time of the sale

or at any other time, including, but not

limited to, any amount charged for, or to

make provision for, advertising or

publicity, marketing and selling

organization expenses, storage, outward

handling, servicing, warranty,

commission or any other matter; but

does not include the amount of duty of

excise, sales tax and other taxes, if any,

actually paid or actually payable on such

goods.”

10.Further, Section 11AC of the Central Excise Act, 1944 reads as

under :

SECTION 11AC. Penalty for short-levy

or non-levy of duty in certain cases. -

(1) The amount of penalty for non-levy

or short-levy or non-payment or short

payment or erroneous refund shall be as

follows:-

(a) where any duty of excise has not

been levied or paid or short-levied or

short-paid erroneously refunded, by

reason of fraud or collusion or any

wilful mis-statement or suppression

of facts, or contravention of any of

the provisions of this Act or of the

rules made thereunder with intent to

evade payment of duty, the person

who is liable to pay duty as

17

determined under sub-section (10) of

section 11A shall also be liable to

pay a penalty equal to the duty so

determined;

(b) where details of any transaction

available in the specified records,

reveal that any duty of excise has

not been levied or paid or short-

levied or short-paid or erroneously

refunded as referred to in sub-

section (5) of section 11A, the

person who is liable to pay duty as

determined under sub- section (10)

of section 11A shall also be liable to

pay a penalty equal to fifty per cent

of the duty so determined;

(c) where any duty as determined

under sub-section (10) of section

11A and the interest payable thereon

under section 11AA in respect of

transactions referred to in clause (b)

is paid within thirty days of the date

of communication of order of the

Central Excise Officer who has

determined such duty, the amount of

penalty liable to be paid by such

person shall be twenty- five per cent

of the duty so determined;

(d) where the appellate authority or

tribunal or court modifies the amount

of duty of excise determined by the

Central Excise Officer under sub-

section (10) of section 11A, then, the

amount of penalties and interest

payable shall stand modified

accordingly and after taking into

account the amount of duty of excise

so modified, the person who is liable

to pay duty as determined under

sub-section (10) of section 11A shall

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also be liable to pay such amount of

penalty or interest so modified.

Explanation - For the removal of

doubts, it is hereby declared that in a

case where a notice has been

served under sub-section (4) of

section 11A and subsequent to issue

of such notice, the Central Excise

Officer is of the opinion that the

transactions in respect of which

notice was issued have been

recorded in specified records and

the case falls under sub-section (5),

penalty equal to fifty per cent of the

duty shall be leviable.

(2) Where the amount as modified by

the appellate authority or tribunal or

court is more than the amount

determined under sub-section (10) of

section 11A by the Central Excise

Officer, the time within which the interest

or penalty is payable under this Act shall

be counted from the date of the order of

the appellate authority or tribunal or

court in respect of such increased

amount.”

11.From a perusal of the record, it appears that the respondent–

assessee, M/s Bharat Aluminium Company Limited (BALCO), is

engaged in the manufacture of Aluminium and Aluminium

products, which fall under the First Schedule to the Central Excise

Tariff Act, 1985. BALCO was duly registered under the Central

Excise law and, in the course of its manufacturing activities, was

availing CENVAT credit on inputs, capital goods and input

services in accordance with the provisions of the CENVAT Credit

19

Rules, 2004. Coal constituted a principal input for its

manufacturing process and was procured by BALCO from M/s

South Eastern Coalfields Limited (SECL). It further emerges that

the Central Excise Department, Headquarters at Bilaspur,

conducted verification and found that BALCO had availed

CENVAT credit on the basis of supplementary invoices issued by

SECL against the original invoices. These supplementary invoices

were raised consequent upon payment of differential central

excise duty by SECL on additional consideration received in

respect of coal supplied, such as royalty, stowing excise duty,

forest cess, terminal tax, Chhattisgarh Vikas Upkar, Chhattisgarh

Paryavaran Upkar, transit fees and other similar charges.

12.The record further shows that proceedings were initiated by the

Department against SECL by issuance of show cause notices

alleging non-payment and short-payment of central excise duty on

the aforesaid additional consideration, which had been collected

from customers but was not included in the assessable value of

coal. The said notices invoked the extended period of limitation on

allegations of suppression of material facts with intent to evade

payment of central excise duty. During the course of

investigation, the Assistant Commissioner, Central Excise,

Bilaspur, addressed a communication to the General Manager of

SECL seeking information regarding supplementary invoices

issued by area offices of SECL at various locations under Bilaspur

jurisdiction during the period from 2010–11 to 2014–15.

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13.In response thereto, SECL furnished details indicating that it had

deposited central excise duty on the aforesaid additional

consideration and had thereafter issued supplementary invoices

to its customers, including BALCO. On the basis of such

supplementary invoices, BALCO availed CENVAT credit

aggregating to Rs. 6,51,22,158/-, comprising basic CENVAT credit

of Rs. 6,32,25,374/-, education cess of Rs. 12,64,527/- and

secondary and higher education cess of Rs. 6,32,257/-, under the

CENVAT Credit Rules, 2004. It is also borne out from the record

that the Department had issued separate notices to M/s SECL for

non-payment of central excise duty on royalty, stowing excise

duty, clean energy cess, transit fees and other charges, which,

according to the Department, were collected from customers but

excluded from the assessable value, resulting in evasion of duty.

The Department alleged that SECL had suppressed material facts

with intent to evade payment of central excise duty and,

accordingly, penalty was imposed upon SECL under Section

11AC of the Central Excise Act, 1944 read with Rule 25 of the

Central Excise Rules, 2002. Subsequently, SECL deposited the

demanded central excise duty on such additional consideration

and issued supplementary invoices to its customers after

finalization of the proceedings. Consequent upon the above,

BALCO was also issued notices by the Department proposing

reversal of the CENVAT credit availed on the ground that the

supplementary invoices issued by SECL were hit by the restriction

21

contained under Rule 9(1)(b) of the CENVAT Credit Rules, 2004.

The Department alleged that BALCO had availed inadmissible

CENVAT credit in contravention of the said provision. The record

further reflects that BALCO contested the proceedings by, inter

alia, contending that SECL, being a Public Sector Undertaking,

could not be attributed with mala fide intent to evade duty and that

the differential duty had been paid subsequently, whereupon

supplementary invoices were issued to customers including

BALCO.

14.From the perusal of the Order-in-Original dated 30.01.2018

passed by the Principal Commissioner, Central Excise and

Customs, Raipur, it appears that BALCO was afforded due

opportunity of personal hearing and was permitted to place its

submissions on record. Upon examination of the material

available, the adjudicating authority noted that there was no

dispute regarding the fact that CENVAT credit had been availed

by BALCO on the strength of supplementary invoices issued by

M/s SECL, which had been issued pursuant to payment of

differential duty confirmed by invoking the extended period of

limitation. The authority also recorded that the collection of

additional charges by SECL from its customers without inclusion

in the assessable value formed the basis for invocation of

extended limitation, indicating non-payment and short-payment of

duty on such consideration.

22

15.From a perusal of the record, it is evident that the Commissioner,

Central Excise and Customs, Raipur, has passed a detailed and

reasoned order, comprehensively examining each and every facet

of the controversy. The adjudicating authority has categorically

held that the respondent had illegally availed the benefit of

CENVAT credit, which it was otherwise not entitled to. The Order-

in-Original elaborately discusses, in considerable detail, the merits

of the case and records a clear finding that the

respondent/company was not eligible to avail CENVAT credit on

the strength of supplementary invoices issued by M/s South

Eastern Coalfields Limited (SECL).

16.The core issue relating to the admissibility of CENVAT credit on

the basis of supplementary invoices issued under Rule 9(1)(b) of

the CENVAT Credit Rules, 2004, was conclusively decided

against the respondent–company. The Commissioner recorded a

specific finding that the supplementary invoices had been issued

consequent upon non-levy and short-levy of duty attributable to

suppression of facts on the part of the issuer of the supplementary

invoices. It was further held that, in view of the express statutory

embargo contained in Rule 9(1)(b) of the CENVAT Credit Rules,

2004, CENVAT credit is impermissible where the additional duty

becomes recoverable from the manufacturer or importer of inputs

on account of fraud, collusion, wilful misstatement, suppression of

facts or contravention of statutory provisions with intent to evade

payment of duty. Accordingly, after an exhaustive consideration of

23

the factual matrix, statutory provisions and legal principles, the

Commissioner held that the respondent–company was liable to

pay central excise duty amounting to Rs. 7,50,88,571/- (Rupees

Seven Crore Fifty Lakh Eighty Eight Thousand Five Hundred and

Seventy One Only), comprising CENVAT credit of

Rs. 7,29,01,526/-, education cess of Rs. 14,58,030/- and

secondary and higher education cess of Rs. 7,29,015/-, under

sub-section (5) of Section 11A of the Central Excise Act, 1944.

The adjudicating authority further ordered appropriation of the

said amount, recovery of interest thereon at the applicable rate

under Section 11AA of the Act, and imposed a penalty of

Rs. 3,75,44,286/- (Rupees Three Crore Seventy Five Lakh Forty

Four Thousand Two Hundred and Eighty Six Only) under Section

11AC(1)(b) of the Central Excise Act, 1944.

17.However, when the respondent challenged the said Order-in-

Original before the Customs, Excise and Service Tax Appellate

Tribunal, Principal Bench, New Delhi, the Tribunal, without

adverting to or dealing with the detailed findings recorded by the

Commissioner, proceeded to allow the appeal. The Tribunal

placed reliance on earlier decisions purportedly involving similar

issues and, without undertaking an independent examination of

the facts or addressing the specific reasoning adopted by the

adjudicating authority, held as under:

“4. Having considered the rival

contentions of both the sides, we take

notice that this Tribunal in connected

24

matter of Ultra Tech Cement Ltd., Unit

Aditya Cement Works vs. C.E. & S.T.,

Udaipur reported in 2018 (8) TMI 952

(CESTAT, New Delhi), wherein the

pendency of similar matter before the

Hon’ble Supreme Court in the case of

South Eastern Coalfields Ltd. and

others, and also other cases referred to

therein, has been considered, and it

has been held that it is an admitted

position that the demand raised by the

department against M/s SECL is under

challenge before the Hon’ble Supreme

Court and, therefore, the CENVAT

credit can be availed by the

manufacturer on the strength of

supplementary invoices, as such

amount of duty cannot be said to have

been paid on account of any non-levy

or short-levy by reason of fraud,

collusion or any wilful misstatement or

suppression of facts or contravention of

any provision of the Central Excise

Act/Rules with intent to evade payment

of duty.”

“5. Also, in Final Order No. 52625/2018

dated 23.07.2018 passed in Excise

Appeal No. 51278/2018, titled M/s Birla

Corporation Ltd. vs. CGST, CC & CE,

Udaipur, this Tribunal, while allowing

the appeal, held that there was no

element of fraud or suppression on the

part of the appellant and that the issue

was recurring in nature. Accordingly, it

was held that the appellant was entitled

to avail CENVAT credit on the

supplementary invoices.”

18.Surprisingly, and without entering into the merits of the present

case or dealing with the specific and cogent reasons recorded by

the Commissioner in the Order-in-Original, the Tribunal, in a

25

cursory and summary manner, allowed the appeal by observing

as under:

“6. Therefore, in view of the facts of the

present case and in view of the various

decisions of this Tribunal on identical

set of facts, we set aside the impugned

order and allow the appeal filed by the

appellants holding that the appellant is

entitled to take CENVAT credit on the

supplementary invoices in question.”

19.From a perusal of the aforesaid order, it is apparent that the

Tribunal has not meticulously examined the matter in its true

perspective. The Tribunal has proceeded solely on the basis of

earlier decisions, which it considered to be identical, without

analysing whether the factual findings, statutory provisions and

the specific reasons recorded by the adjudicating authority in the

present case stood duly addressed or distinguished. In the

considered opinion of this Court, such an approach is not in

consonance with law.

20.Hon’ble Supreme Court in the matter of Assistant

Commissioner, Commercial Tax Department, Works Contract

and Leasing, Kota, reported in (2010) 4 SCC 785 has held as

under :

“12. In exercise of the power of judicial

review, the concept of reasoned

orders/actions has been enforced

equally by the foreign courts as by the

courts in India. The administrative

authority and tribunals are obliged to

give reasons, absence whereof could

render the order liable to judicial

26

chastisement. Thus, it will not be far

from an absolute principle of law that

the courts should record reasons for

their conclusions to enable the

appellate or higher courts to exercise

their jurisdiction appropriately and in

accordance with law. It is the reasoning

alone, that can enable a higher or an

appellate court to appreciate the

controversy in issue in its correct

perspective and to hold whether the

reasoning recorded by the court whose

order is impugned, is sustainable in law

and whether it has adopted the correct

legal approach. To subserve the

purpose of justice delivery system,

therefore, it is essential that the courts

should record reasons for their

conclusions, whether disposing of the

case at admission stage or after regular

hearing.”

21.Further, in the matter of Kranti Associates (P) Ltd. v. Masood

Ahmed Khan, reported in (2010) 9 SCC 496, Hon’ble Supreme

Court has held that reasons are the heartbeat of every conclusion;

without them, the order becomes lifeless. It was held as under :

“47. Summarising the above

discussion, this Court holds:

(a) In India the judicial trend has

always been to record reasons,

even in administrative decisions,

if such decisions affect anyone

prejudicially.

(b) A quasi-judicial authority must

record reasons in support of its

conclusions.

(c) Insistence on recording of

27

reasons is meant to serve the

wider principle of justice that

justice must not only be done it

must also appear to be done as

well.

(d) Recording of reasons also

operates as a valid restraint on

any possible arbitrary exercise of

judicial and quasi-judicial or even

administrative power.

(e) Reasons reassure that

discretion has been exercised by

the decision-maker on relevant

grounds and by disregarding

extraneous considerations.

(f) Reasons have virtually become

as indispensable a component of

a decision-making process as

observing principles of natural

justice by judicial, quasi-judicial

and even by administrative

bodies.

(g) Reasons facilitate the process

of judicial review by superior

courts.

(h) The ongoing judicial trend in

all countries committed to rule of

law and constitutional governance

is in favour of reasoned decisions

based on relevant facts. This is

virtually the lifeblood of judicial

decision-making justifying the

principle that reason is the soul of

justice.

(i) Judicial or even quasi-judicial

opinions these days can be as

different as the judges and

authorities who deliver them. All

28

these decisions serve one

common purpose which is to

demonstrate by reason that the

relevant factors have been

objectively considered. This is

important for sustaining the

litigants' faith in the justice

delivery system.

(j) Insistence on reason is a

requirement for both judicial

accountability and transparency.

(k) If a judge or a quasi-judicial

authority is not candid enough

about his/her decision-making

process then it is impossible to

know whether the person

deciding is faithful to the doctrine

of precedent or to principles of

incrementalism.

(l) Reasons in support of

decisions must be cogent, clear

and succinct. A pretence of

reasons or “rubber-stamp

reasons” is not to be equated with

a valid decision-making process.

(m) It cannot be doubted that

transparency is the sine qua non

of restraint on abuse of judicial

powers. Transparency in

decision-making not only makes

the judges and decision-makers

less prone to errors but also

makes them subject to broader

scrutiny. (See David Shapiro in

Defence of Judicial Candor

[(1987) 100 Harvard Law Review

731-37] .)

(n) Since the requirement to

29

record reasons emanates from

the broad doctrine of fairness in

decision-making, the said

requirement is now virtually a

component of human rights and

was considered part of

Strasbourg Jurisprudence. See

Ruiz Torija v. Spain [(1994) 19

EHRR 553] EHRR, at 562 para

29 and Anya v. University of

Oxford [2001 EWCA Civ 405

(CA)] , wherein the Court referred

to Article 6 of the European

Convention of Human Rights

which requires, “adequate and

intelligent reasons must be given

for judicial decisions”.

(o) In all common law jurisdictions

judgments play a vital role in

setting up precedents for the

future. Therefore, for

development of law, requirement

of giving reasons for the decision

is of the essence and is virtually a

part of “due process”.

48. For the reasons aforesaid, we

set aside the order of the National

Consumer Disputes Redressal

Commission and remand the matter

to the said forum for deciding the

matter by passing a reasoned order

in the light of the observations made

above. Since some time has

elapsed, this Court requests the

forum to decide the matter as early

as possible, preferably within a

period of six weeks from the date of

service of this order upon it.”

30

22.Likewise, in the matter of CIT v. Chenniappa Mudaliar, reported

in (1969) 1 SCC 591, Hon’ble Supreme Court has held as under :

“7. The scheme of the provisions of the

Act relating to the Appellate Tribunal

apparently is that it has to dispose of an

appeal by making such orders as it

thinks fit on the merits. It follows from

the language of Section 33(4) and in

particular the use of the word “thereon”

that the Tribunal has to go into the

correctness or otherwise of the points

decided by the departmental authorities

in the light of the submissions made by

the appellant. This can only be done by

giving a decision on the merits on

questions of fact and law and not by

merely disposing of the appeal on the

ground that the party concerned has

failed to appear. As observed in

Hukumchand Mills Ltd. v. CIT, [(1967)

63 ITR 232 : 1966 SCC OnLine SC

171] the word “thereon” in Section 33(4)

restricts the jurisdiction of the Tribunal

to the subject-matter of the appeal and

the words “pass such orders as the

Tribunal thinks fit” include all the

powers (except possibly the power of

enhancement) which are conferred

upon the Appellate Assistant

Commissioner by Section 31 of the Act.

The provisions contained in Section 66

about making a reference on questions

of law to the High Court will be

rendered nugatory if any such power is

attributed to the Appellate Tribunal by

which it can dismiss an appeal, which

has otherwise been properly filed, for

default without making any order

thereon in accordance with Section

33(4). The position becomes quite

simple when it is remembered that the

assessee or the CIT, if aggrieved by the

31

orders of the Appellate Tribunal, can

have resort only to the provisions of

Section 66. So far as the questions of

fact are concerned the decision of the

Tribunal is final and reference can be

sought to the High Court only on

questions of law. The High Court

exercises purely advisory jurisdiction

and has no appellate or revisional

powers. The advisory jurisdiction can

be exercised on a proper reference

being made and that cannot be done

unless the Tribunal itself has passed

proper order under Section 33(4). It

follows from all this that the Appellate

Tribunal is bound to give a proper

decision on questions of fact as well as

law which can only be done if the

appeal is disposed of on the merits and

not dismissed owing to the absence of

the appellant. It was laid down as far

back as the year 1952 by S.R. Das, J.

(as he then was) in CIT v. Arunachalam

Chettiar [(1952) 2 SCC 805 : (1953) 23

ITR 180] that the jurisdiction of the

Tribunal and of the High Court is

conditional on there being an order by

the Appellate Tribunal which may be

said to be one under Section 33(4) and

a question of law arising out of such an

order. The Special Bench, in the

present case, while examining this

aspect quite appositely referred to the

observations of Venkatarama Aiyar, J.

in CIT v. Scindia Steam Navigation Co.

Ltd. [(1961) 42 ITR 589 : 1961 SCC

OnLine SC 118] indicating the necessity

of the disposal of the appeal on the

merits by the Appellate Tribunal. This is

how the learned judge had put the

matter in the form of interrogation:

32

“….How can it be said that the Tribunal

should seek for advice on a question

which it was not called upon to consider

and in respect of which it had no

opportunity of deciding whether the

decision of the Court should be sought.”

Thus looking at the substantive

provisions of the Act there is no escape

from the conclusion that under Section

33(4) the Appellate Tribunal has to

dispose of the appeal on the merits and

cannot short-circuit the same by

dismissing it for default of appearance.”

23.The Order-in-Original passed by the Commissioner is a reasoned

and speaking order, wherein each and every aspect of the matter

has been examined in detail. Unless the findings recorded therein

are re-appreciated on merits and each determinative issue is dealt

with by assigning cogent reasons, the Tribunal could not have set

aside the said order merely by relying upon earlier decisions.

Judicial discipline requires that reasons given by the original

authority be specifically met and rebutted. In view of the aforesaid,

this Court is of the opinion that the matter deserves to be

remanded to the Tribunal for fresh consideration.

24.In view of the fact that matter is remanded back to the CESTAT for

fresh adjudication on merits, it is not desirable to decide the

substantial question in any way.

25.Accordingly, while setting aside the impugned order passed by the

Tribunal, the matter is remanded back to the CESTAT with a

direction to decide the appeal afresh, in accordance with law, by

33

adjudicating upon each and every aspect dealt with by the

Commissioner and by passing a reasoned and speaking order.

The Tribunal shall be at liberty to afford an opportunity of

rehearing to the parties, if so required.

26.It is made clear that this Court has not expressed any opinion on

merits of the case and the CESTAT is required to pass orders on

merits without being influenced by any observation made by this

Court.

27.The concerned records shall be transmitted back to the Tribunal

for the aforesaid purpose.

Sd/- Sd/-

(Sanjay S. Agrawal) (Amitendra Kishore Prasad)

Judge Judge

Shayna

34

Head-Note

Administrative and quasi-judicial decisions affecting rights

must be supported by cogent and intelligible reasons.

Reasoned orders sustain public confidence in the justice

delivery system and form an integral part of due process and

the rule of law. In the absence of a reasoned order, the

decision remains incomplete and unsustainable in law.