2014 (5) TMI 640 - HC - Central Excise

Duty evasion - Removal of scrap and waste - order beyond the scope of show cause notice - Held that - The material on record would clearly show that the de novo order passed by the adjudicating authority is not based upon the valuation of the scrap materials removed as duty, has been paid before removing the said scrap material and duty is demanded in respect of the loss of 2.04% to be recovered while enamelling copper which was not at all proposed in the show cause notice. It is well settled that the order of adjudicating authority should be confined to the proposals made in the show cause notice and without mentioning the said amount in the show cause notice, no order could be passed by as any order passed by the adjudicating authority beyond the scope of show cause notice is wholly without jurisdiction. Accordingly, we hold that the order passed by the CESTAT setting aside the order of adjudicating authority is justified - Decided against Revenue.

Summary

Issues involved:
Appeal by Revenue against order of Customs, Excise and Service Tax Appellate Tribunal - Removal of scrap without paying duty - Cenvat credit availed - Show cause notice issued for duty recovery, Cenvat credit demand, interest, and penalty - Order-in-Original restricting recovery to excess material used - De novo order demanding duty, penalty, and interest - CESTAT allowing appeal - Substantial question of law on application of precedent.

Analysis:
1. Appeal by Revenue: The Revenue appealed against the Customs, Excise and Service Tax Appellate Tribunal's order allowing the assessee's appeal regarding the removal of scrap without paying duty. The show cause notice demanded duty recovery, Cenvat credit, interest, and penalty. The Order-in-Original limited recovery to excess material used, but a de novo order demanded duty, penalty, and interest. The CESTAT allowed the appeal, prompting the Revenue's appeal based on a substantial question of law.

2. Contentions of the Parties: The Revenue argued that scrap materials were removed without paying duty, citing a precedent. The respondent countered that the order focused on copper loss, not proposed duty and penalty on scrap material. The Tribunal's decision was supported as final on factual matters.

3. Judicial Scrutiny: The Court examined the show cause notice, noting the proposed duty on scrap copper. It found the de novo order exceeded the notice's scope by demanding duty on copper loss during enameling, not mentioned earlier. The principle that orders must align with show cause notice proposals was emphasized, rendering the de novo order unjustifiable. The cited precedent on waste removal for melting did not apply to the present case, supporting the CESTAT's decision.

4. Judgment: The Court dismissed the appeal, upholding the CESTAT's decision to set aside the adjudicating authority's order. The substantial question of law was answered against the Revenue in favor of the assessee. The order passed by the CESTAT was deemed justified, and the appeal by the Revenue was rejected accordingly.