January 29, 2026 : The Delhi Bench of the Customs Excise and Service Tax Appellate Tribunal has set aside a service tax demand of ₹30.05 lakh, holding that the adjudicating authority failed to follow binding remand directions and travelled beyond the scope of the original show cause notice. The Tribunal ruled that such an approach violates settled principles of law and renders the adjudication legally unsustainable.
Allowing the appeal filed by M/s R.K. Transport Company, the Tribunal quashed the demand of Cenvat credit along with interest and penalty. The order was passed by Dr. Rachna Gupta, Judicial Member, in Service Tax Appeal No. 50208 of 2024, arising out of an Order-in-Original dated 16 November 2023.
The appellant is engaged in site formation, excavation, earthmoving and demolition services and had availed Cenvat credit under the Cenvat Credit Rules, 2004. Following an audit, the department issued a show cause notice on 23 October 2013 alleging multiple irregularities, including excess availment of Cenvat credit of ₹30.05 lakh due to a mismatch between the closing balance for September 2009 and the opening balance for October 2009 in ST-3 returns. The notice also proposed recovery of service tax exceeding ₹14 crore on various other grounds.
In the first round of litigation, the Tribunal, by a final order dated 22 September 2020, set aside the entire demand except the alleged excess Cenvat credit of ₹30.05 lakh. That limited issue was remanded to the Commissioner with specific directions to verify the invoices produced by the assessee and reconsider the explanation offered. The remand was expressly confined to factual verification and reconciliation.
However, in the remand proceedings, the Commissioner again confirmed the demand of ₹30.05 lakh. The assessee challenged this order, contending that the remand directions were not followed and that new allegations were introduced beyond the show cause notice.
On examining the record, the Tribunal found that the alleged excess credit arose purely from a clerical error in reporting the closing balance of Cenvat credit for September 2009. The opening balance for October 2009 correctly matched the Cenvat credit register and was fully supported by 16 invoices placed on record. Despite this, the Commissioner failed to carry out an invoice-wise analysis or reconcile the figures, even after the limited remand.
The Tribunal also noted that the adjudicating authority introduced a fresh allegation regarding wrongful availment of 100 percent Cenvat credit on capital goods, an issue never proposed in the original show cause notice. Reiterating settled law, the Tribunal held that no demand can be confirmed on grounds not set out in the notice and that any adjudication beyond its scope is impermissible.
On limitation, the Tribunal held that there was no evidence of suppression, wilful misstatement or fraud. The show cause notice itself was based entirely on the assessee’s own records and statutory returns. A mere clerical or inadvertent error in filing returns, the Tribunal observed, cannot justify invocation of the extended period of limitation. In the absence of deliberate wrongdoing, interest and penalty were also held to be not recoverable.
Holding that the impugned order suffered from serious legal infirmities, the Tribunal set aside the Order-in-Original dated 16 November 2023 in its entirety. The appeal was allowed in full, the demand of ₹30.05 lakh towards Cenvat credit was quashed, and the interest and penalty were dropped. The Tribunal reaffirmed that adjudicating authorities are bound by remand directions and must adhere strictly to judicial discipline.
Cause Title: M/s. R.K. Transport Company Versus Commissioner of Central Excise & CGST
Case No.: Service Tax Appeal No. 50208 of 2024
Coram: Dr. Rachna Gupta (Judicial Member)
