Order Date – 06 January 2023

Parties: M/s KEI Industries Limited Vs Commissioner (Appeals), C.E. & CGST, Jaipur

Facts –

• The Appellant, M/s KEI Industries Limited was issued show cause notice dated 07.09.2017 proposing a demand of Rs. 1,70,89,498/- under rule 6(3A) of the CENVAT Credit Rules, 2004 on the ground that apart from manufacturing excisable goods, the appellant was also engaged in trading of goods in such turnkey projects, which would qualify as exempted service‘ and accordingly, CENVAT credit was liable to be reversed under rule 6(3A) of the 2004 Credit Rules. 
• During the course of hearing, Commissioner (Appeals) entertained a view that the appellant had short-paid Service tax on turnkey projects, but as this was not a matter covered by the show cause notice dated 07.09.2017, the Commissioner (Appeals) purported to exercise powers conferred on Commissioner (Appeals) under the second proviso to section 35A(3) of the Excise Act read with section 73 of the Finance Act and issued a fresh notice dated 29.12.2020 to the appellant proposing a demand of service tax of Rs. 37,05,65,014/- for short payment of service tax for the period from October 2014 to June 2017 with interest and penalty.

Issue –

• Whether the Commissioner (Appeal) is having the jurisdiction to issue the show cause notice?

Order –

• The Tribunal held that no matter how wide the powers of the Commissioner (Appeals) may be under section 85(4) of the Finance Act to pass such orders, as he thinks fit, but he cannot under sub-section (4) of section 85 assume to himself the power to issue a notice contemplated under section 73 (1) of the Finance Act to raise a demand unless such a power is specifically conferred upon him.
• The power to issue a notice is specifically provided for in section 73 (1) of the Finance Act. Once it is specifically so provided, it cannot be urged that this power to issue the notice would also be available under sub-section (4) of section 85 of the Finance Act to a Commissioner (Appeals) when he is hearing an appeal, merely because of the use of the expression ‘pass such orders, as he thinks fit’.
• The notice dated 29.12.2020, therefore, that was issued by the Commissioner (Appeals) under section 73(1) of the Finance Act was without jurisdiction and consequently the order passed by the Commissioner (Appeals) confirming the demand proposed in the said notice would also be without jurisdiction.
• Hence the appeal is allowed.