2008 (9) TMI 381 - HC - Central Excise

Denial of credit - Demand - Show cause notice - recovery of inadmissible Modvat credit - Held that - As find from the Order of the Tribunal is that its ultimate conclusion is based on the findings of fact recorded by the Asst. Commissioner and the Commissioner (Appeals). The Asst. Commissioner having observed that there is a declaration on record, could not have gone ahead and considered the issue of eligibility in the absence of clear allegations in that behalf. That being the case, he clearly transgressed the powers conferred and acted beyond jurisdiction by taking into account matters which were not alleged in the show cause notice. That is a factual position emerging from the record. That factual position having been noticed, the Tribunal has rightly quashed and set aside the Order of the Commissioner (Appeals) and allowed the assessee s appeal in toto. We are in agreement with the factual findings recorded in Para 4 and 5 of the Tribunal s Order based as they are on the materials on record. There is no substantial question of law in the peculiar facts of this case which requires any answer. The matter turns on its own facts and, therefore, we need not answer the questions of law referred to above.

Summary

Issues:
1. Interpretation of Show Cause Notice under Rule 57U of Central Excise Rules, 1944.
2. Jurisdiction of the Asst. Commissioner in confirming demands based on show cause notice allegations.
3. Validity of Order based on allegations in the show cause notice.
4. Applicability of Modvat credit eligibility based on declarations in show cause notice.

Analysis:
1. The judgment involves the interpretation of a Show Cause Notice issued under Rule 57U of the Central Excise Rules, 1944. The Tribunal referred questions of law to the High Court regarding the necessity of stating grounds for denial of credit in the notice, the scope of allegations in the notice, and the validity of the notice concerning specific goods under Rule 57Q.

2. The jurisdiction of the Asst. Commissioner in confirming demands based on the show cause notice allegations was questioned. The Asst. Commissioner's Order confirming inadmissible Modvat credit was deemed unsustainable as he exceeded his authority by considering Modvat credit eligibility without clear allegations in the notice. The Commissioner (Appeals) erred in remanding the matter instead of quashing the unsustainable order.

3. The validity of the Order based on the show cause notice allegations was a crucial issue. The Tribunal found that the Asst. Commissioner had overstepped his authority by considering eligibility issues not alleged in the notice. The Tribunal rightly quashed the Commissioner (Appeals) Order and allowed the assessee's appeal based on factual findings and materials on record.

4. The applicability of Modvat credit eligibility based on declarations in the show cause notice was a significant aspect. The Tribunal concluded that the Asst. Commissioner acted beyond jurisdiction by considering eligibility issues not raised in the notice. The judgment emphasized that the matter hinged on factual findings and did not require answers to the referred questions of law.

In conclusion, the High Court upheld the Tribunal's decision and disposed of the reference accordingly, emphasizing the factual basis of the case and the absence of substantial legal questions. The judgment clarified the limitations of jurisdiction concerning show cause notices and the importance of adhering to the scope of allegations in such notices for valid orders.