2023 (2) TMI 778 - HC - Central Excise

Order beyond the scope of show cause notice - Rejection of stay application filed by the assessee against the demand of duty - stay granted only with respect to demand of interest and penalty - refusal to grant waiver of pre-deposit of the amount during the pendency of the appeal - HELD THAT - In view of the fact that the main appeal is still pending and the arguments advanced are purely legal, present appeal is being disposed of at the fresh stage with the consent of parties. Submission is, the adjudicating authority could not have travelled beyond the scope of the show cause notice. Vide show cause notices dated 19.10.2007 and 29.4.2008, the assessee was only required to show cause why its claim of CENVAT credit may not be disallowed against the goods (specified in the notice) as they did not fall within the definition of the term 'Capital Goods'. No allegation was levelled in the show cause notice to disallow such claim on merits that input goods had not been purchased or received or used. However, while passing the adjudication order dated 14.10.2009, the adjudicating authority has fallen in error in rejecting the claim on the basis of utilisation which was not an issue to be adjudicated. It cannot be disputed that the issue on which adjudication was sought to be made and the issue that has been adjudicated appear to be different. Insofar as the issue on merits had not been opened in the show cause notice, prima facie case is made out for grant of interim protection. The present appeal is disposed of with the observation that the Tribunal shall make best efforts to hear and decide the above appeal within a period of three months.

Summary

Issues:
1. Refusal to grant waiver of pre-deposit during appeal.
2. Misconstruing evidence and rejecting waiver application.

Analysis:

Issue 1: Refusal to grant waiver of pre-deposit during appeal
The appeal was against the Central Excise and Service Tax Appellate Tribunal's order rejecting the stay application against the duty demand, granting stay only for interest and penalty. The appellant raised the question of law regarding the Tribunal's refusal to examine if the original order exceeded the show cause notice, justifying waiver of pre-deposit during appeal. The appellant argued that the adjudicating authority erred by going beyond the notice's scope. The show cause notices focused on disallowing CENVAT credit for specific goods, not on the utilization issue as in the adjudication order. The court found a prima facie case for interim protection due to the discrepancy between the issues raised and adjudicated, setting aside the Tribunal's order and directing expedited appeal proceedings within three months.

Issue 2: Misconstruing evidence and rejecting waiver application
The appellant contended that the Tribunal misconstrued evidence like issue slips, panchnama, and engineer certificates, disregarding them in rejecting the waiver application. The appellant referred to a test laid down by a Division Bench in a previous case to support their argument. The respondent argued that the appellant had previously obtained a stay through a writ petition, seeking another stay due to territorial jurisdiction issues. The court, after hearing both sides, acknowledged the discrepancy between the issues raised and adjudicated, leading to the rejection of the stay application. The court directed that coercive measures remain stayed for three months or until appeal disposal, whichever is earlier, provided the disputed amount is secured in the Electronic Credit Ledger under the GST regime.

This detailed analysis covers the issues raised in the judgment, addressing the legal arguments, evidence considerations, and the court's decision regarding the waiver of pre-deposit during the appeal process.