2016 (3) TMI 433 - AT - Central Excise

Disallowance of Cenvat credit on Wires and Cables falling under Chapter 85 and on refractory falling under Chapter 69 - isallowance of the credit on the aforesaid items on the ground that these are not Capital goods in terms of definition of Capital goods - Held that - The wires and cables being covered under Chapter 85 is specified under sub clause (A)(i) of Clause (a) of Rule 2 of Cenvat Credit Rules, 2004 and refractory and refractory material the covered under sub clause (v) accordingly the appellant s goods are undoubtedly falling under the definition of Capital goods, hence the credit cannot be denied. As regard the issue that the invoices bear two addresses and therefore it is not established that the capital goods were received in the factory of the appellant, find that this ground was taken by Ld. Commissioner(Appeals) while passing the impugned order, this is a matter of fact and it is necessary on part of the Revenue to investigate that only on the basis that two addresses mentioned on the invoices whether the Capital goods received in the factory and used in the factory, however no such exercise was carried out by the Revenue and issue was not raised in the show cause notice, even adjudicating authority also was not given any finding on this issue. Thus agree with the Ld. Counsel that this fresh issue raised first time in the impugned order and the same was not raised in the show cause notice. The appellant was not put to notice on this issue therefore it is not open for the Revenue to decide the matter on a issue which is not embodied in the show cause notice. Thus it is settled law that new case cannot be made out after issuance of show cause notice and after passing the adjudication order. Both the lower authority have wrongly denied the Cenvat credit on the Capital goods - Decided in favour of assessee

Summary

Issues:
1. Denial of Cenvat credit on wires, cables, and refractory as capital goods.
2. Rejection of appeal by Commissioner(Appeals) based on new ground of invoices bearing two addresses.

Issue 1: Denial of Cenvat credit on wires, cables, and refractory as capital goods:
The appellant availed Cenvat credit on wires, cables falling under Chapter 85 and refractory falling under Chapter 69. The adjudicating authority confirmed the demand of Cenvat credit and imposed penalties. The Commissioner(Appeals) rejected the appeal on the grounds that the items were not capital goods and that the invoices indicated two addresses, suggesting the goods were not received in the appellant's factory. The appellant argued that both wires, cables, and refractory fell under the definition of "Capital goods" prevailing at the relevant time. The issue of invoices bearing two addresses was not raised in the show cause notice, and the adjudicating authority did not address this issue. The appellant cited relevant judgments to support their case. The Revenue reiterated the findings of the impugned order, considering the new ground raised by the Commissioner(Appeals) as a subsidiary issue. The Tribunal analyzed the definition of "Capital goods" under the Cenvat Credit Rules, 2004, and concluded that wires, cables, and refractory fell under this definition. The Tribunal emphasized that the issue of invoices bearing two addresses was not raised in the show cause notice, and the Revenue did not investigate this aspect. Citing Supreme Court judgments, the Tribunal held that a new issue cannot be raised post issuance of show cause notice and adjudication order. Therefore, the Tribunal allowed the appeal, setting aside the impugned order.

Issue 2: Rejection of appeal by Commissioner(Appeals) based on new ground of invoices bearing two addresses:
The Commissioner(Appeals) rejected the appeal not only on the grounds of items not being capital goods but also due to invoices bearing two addresses, suggesting the goods were not received in the appellant's factory. The appellant argued that this new ground was not part of the show cause notice and was raised for the first time by the Commissioner(Appeals). The Revenue considered this ground as a subsidiary issue. The Tribunal emphasized that the appellant was not put on notice regarding this issue, and the Revenue failed to investigate whether the capital goods were received and used in the factory based on the two addresses on the invoices. Citing relevant judgments, the Tribunal held that a new issue cannot be introduced post issuance of show cause notice and adjudication order. Therefore, the Tribunal concluded that the denial of Cenvat credit based on this new ground was not justified, and the appeal was allowed.

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