2003 PLP (Trib (PTD)

2. The brief facts of the case are that the scrutiny of the taxable records of Messrs. Zeal Pak Cement Factory Ltd., Hyderabad for the year 1994‑95 did reveal that the said factory took wrong adjustment of input tax on "fire bricks and spare parts" imported during January, 1994 to June, 1995 involving sales tax of Rs.44,79,

365. Out of that input tax to the tune of Rs. 7,15,907 was adjusted from the output tax through monthly instalments during February, 1995 to June, 1995.

3. The Sales Tax Department is of the view that the adjustment of input tax made on the import of spares was admissible had the goods been imported with plant and machinery. The department further states that spares imported for replacement or maintenance purpose are not covered under section 10 of the Sales Tax Act, 1990. In this regard department did place reliance on a clarification issued by the Central Board of Revenue vide its Letter C. No.1(4) GST‑1/93, dated 10‑7‑1993.

4. The department did not treat fire bricks as machinery or spares and concluded that adjustment of Rs.7,15,907 as input tax in respect of fire bricks was also not legally admissible.

5. The sales tax department accordingly raised demand against Messrs Zeal Pak Cement Factory Ltd., Hyderabad, on the charge of wrongly claiming adjustment of input tax amounting to Rs.7,15,907 and that too in breach of the provisions of sections 6 and 7 of the Sales Tax Act, 1990, punishable under section 33 alongwith recovery of the said amount under section 36 additional tax amounting to Rs.9,37‑,838 and surcharge amounting to Rs.1,03,801 under section 34 of the Sales Tax Act, 1990. It was the opinion 'of the department that the amount of surcharge will continue to enhance till the date of payment of tax due as per appropriate rate.

6. The case came up for hearing before the Adjudicating Officer who decided the case against the appellant. Hence the present appeal.

7. It has been contended on behalf of the appellant that order passed by the respondent are illegal inasmuch as that the appellant has been denied benefit of section 7 of the Sales Tax Act, 1990, for adjustment of input tax on the raw materials being directly used for the production of taxable supplies. The department on the other hand contend that case was made out on the basis of an audit report, which concluded that the action of the appellant was illegal.

8. We asked that whether or not the said report was given to the appellant and did the basis for issuance of show‑cause notice were revealed before the issuance of show‑cause notice. The departmental representative stated that the same was not done.

9. It is evident that show‑cause notice was issued to the appellant without providing or revealing to him the cause of its issuance. The order appealed against thus suffers from procedural impropriety inasmuch as that the evidence and the basis for the issuance of show‑cause notice were not revealed to the appellant. The same amounts to denial of a fair opportunity to defend the case. Hence the order appealed against is illegal.

10. In the foregoing circumstances we would like to set aside the order passed by the Adjudicating Officer and remand the case back to him to decide it afresh after providing the copy of the audit report and after providing the appellant a fair chance to defend the case. C.M.A./604/Tax (Trib.) Appeal remanded.