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2018 (8) TMI 1575 - AT - Central ExciseScope of SCN - Respondent has pointed out that only one appeal had been filed by the department to the Commissioner (Appeals) in respect of M/s.Surya Prakash Foundary (SPF). Only by way of a letter dt. 18.11.2009, the department made a request to add the names of other three respondents - SSI Exemption - dummy units - Held that - Tribunal in the case of CC (Export), Mumbai Vs Chokhani Silk Mills Pvt. Ltd. 2013 (12) TMI 1298 - CESTAT MUMBAI in respect of a departmental appeal had held that department could not have added or impleaded the respondents to main appellant, against whom no appeal was filed - primary objection of the respondent on this score will therefore succeed. Another case of respondent is that Revenue in paragraphs H, K, L, M of their grounds of appeal have tried to put forth grounds which were not at all raised in the SCN and hence the appeal on these grounds cannot be entertained - Held that - Revenue appeals are devoid of merits by putting forth grounds which are beyond the scope of the SCN. Appeal disposed off.
Issues Involved:
1. Legality of adding names of respondents after the initial appeal. 2. Validity of grounds raised by the department that were not included in the Show Cause Notice (SCN). 3. Examination of evidence and statements regarding the manufacturing activities of the respondents. 4. Imposition of penalties based on the findings. Issue-wise Detailed Analysis: 1. Legality of Adding Names of Respondents After the Initial Appeal: The department initially filed an appeal only against M/s. Surya Prakaas Foundry (SPF) and later sought to add the names of the other three respondents via a letter dated 18.11.2009. The respondents argued that this addition was "bad in law" and referenced Tribunal decisions, including CCE Vs Chokhani Silk Mills (P) Ltd. and CCE Vs Mahavir Group of Companies, which held that the department could not add or implead respondents to the main appeal if no appeal was initially filed against them. The Tribunal found merit in this objection, citing that procedural omissions cannot be corrected post-facto to vitiate the proceedings. 2. Validity of Grounds Raised by the Department Not Included in the SCN: The respondents contended that the grounds of appeal raised by the department in paragraphs H, K, L, and M were not part of the original SCN and should not be entertained. The Tribunal agreed, stating that the SCN is the foundation of the demand under the Central Excise Act, and any subsequent orders must be confined to the SCN. This principle was supported by the judgment in Commissioner Vs Reliance Ports and Terminals Ltd., which emphasized that new grounds not mentioned in the SCN could not be introduced at the appeal stage. 3. Examination of Evidence and Statements Regarding Manufacturing Activities: The department's case relied heavily on the statement of Mr. M. Kanagarajan, Managing Partner of SPF, recorded on 08.02.2008, which admitted that SPA and SSA were dummy units with no manufacturing activity. However, Mr. Kanagarajan retracted his admissions in a subsequent statement dated 18.06.2008. The Tribunal noted that the second statement, recorded by the same officer, effectively retracted the initial admissions. Given this retraction and the lack of corroborative evidence, the Tribunal found it challenging to uphold the department's allegations. 4. Imposition of Penalties Based on the Findings: The original adjudicating authority had dropped the proceedings against the respondents, only imposing a minor penalty of ?2000 on SPF for contravening Rule 9 of the Central Excise Rules, 2002. The Commissioner (Appeals) upheld this decision. The Tribunal found no basis for imposing penalties when the primary allegations were not substantiated by reliable evidence. The Tribunal allowed the respondents' cross objections, emphasizing that penalties could not be imposed based on retracted statements and unsupported allegations. Conclusion: The Tribunal dismissed the Revenue's appeals, finding them devoid of merit due to procedural and substantive deficiencies. The respondents' cross objections were allowed, reinforcing the principle that appeals must be confined to the grounds raised in the original SCN and supported by credible evidence. The appeals were disposed of on these terms.
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