2009 (5) TMI 759 - AT - Central Excise

Order of Commissioner - scope of SCN - denial of benefit of N/N. 9/2000-C.E., dated 1-3-2000 - Held that - The ground on which the lower appellate authority has denied the benefit of the notification is not a ground either contained in the SCN or a ground on which the benefit was denied by the adjudicating authority. It is a new ground trotted out for the first time by the Commissioner. He has traversed beyond the SCN and the adjudication order which is not permissible in law - appeal allowed - decided in favor of appellant.

Issues:
1. Availing benefit of exemption under SSI Notification No. 9/2000-C.E.
2. Discharging duty at a concessional rate for job work done for another company.
3. Denial of benefit by the Commissioner (Appeals) based on a new ground not mentioned in the show-cause notice.

Issue 1: Availing benefit of exemption under SSI Notification No. 9/2000-C.E.
The appellants, engaged in manufacturing bulk drugs and leather chemicals, were availing the benefit of exemption under SSI Notification No. 9/2000-C.E. for their own production. Additionally, they were undertaking job work for another company. The dispute arose when the department contended that the SSI benefit could only be availed for the appellants' own clearances and not for clearances on behalf of their raw material suppliers. A show-cause notice was issued proposing recovery of differential duty and penalty. The Asst. Commissioner confirmed the demand, and the Commissioner (Appeals) upheld the denial of the notification benefit, citing the use of the supplier's brand name. The appellants challenged this decision on appeal.

Issue 2: Discharging duty at a concessional rate for job work done for another company
The appellants had cleared goods for the other company on payment of duty at a concessional rate within the exemption limit. The department argued that this was incorrect as the SSI benefit should only apply to the appellants' own clearances. The dispute centered on whether the appellants were entitled to avail the exemption for job work done for another entity. The lower appellate authority upheld the department's view, leading to the appeal before the Tribunal.

Issue 3: Denial of benefit by the Commissioner (Appeals) based on a new ground
The Commissioner (Appeals) denied the benefit of the SSI notification on the grounds that the appellants were using the brand name of the other company for which they were doing job work, which was not entitled to the SSI concession. However, this ground was not part of the show-cause notice or the adjudication order. The Tribunal held that introducing a new ground beyond what was in the notice or adjudication order was impermissible. Consequently, the Tribunal set aside the Commissioner's decision and allowed the appeal in favor of the appellants.

This judgment highlights the importance of adherence to procedural fairness and the principle of natural justice in tax matters, emphasizing that parties should be informed of the grounds on which benefits are being denied. The Tribunal's decision to set aside the Commissioner's order underscores the significance of maintaining consistency in the grounds for denying benefits throughout the adjudicatory process.

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