2004 (8) TMI 275 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification 121/94 regarding exemption for inputs used in the manufacture of final products.
2. Application of Chapter X Procedure for availing exemption under the Notification.
3. Compliance with the terms of the Notification in cases where the input is used in a factory of a manufacturer different from the factory where the goods were produced.

Analysis:

1. The Appellants manufactured unbranded chewing tobacco falling under Heading 24.04. Notification 121/94 exempted inputs used in the manufacture of specified final products, with a provision for use in a factory different from the manufacturer's factory subject to Chapter X Procedure. The Notification was later amended by Notification 21/96, replacing sub-headings with Chapter 24.

2. The Appellants followed Chapter X Procedure and submitted CT-2 certificates for claiming exemption on unbranded chewing tobacco sent to another factory. However, show cause notices alleged that the product sent was a final product, not an intermediate one, thus challenging the applicability of the Notification.

3. The Assistant Commissioner initially held that the Notification wasn't restricted to final products but disallowed the benefit on the grounds of non-usage in the same factory. The CCE (Appeals) disagreed with this ground but denied the benefit based on a different premise, requiring both factories to belong to the same manufacturer and the use to be for "industrial use," citing a non-existent Explanation to the Notification.

4. The Tribunal found that both the Assistant Commissioner and CCE (Appeals) exceeded the show cause notice's scope by upholding demands on unmentioned grounds, which was impermissible. Citing precedents, the Tribunal emphasized that an exemption cannot be denied on grounds not originally contended by the Revenue without providing a fresh notice to the appellant.

5. The Tribunal highlighted the second proviso of Notification 121/94, clarifying that the use of inputs in a factory different from where the goods were produced should relate to the same manufacturer. As the use in a different manufacturer's factory was not permissible, the Tribunal rejected the Appellants' contention for exemption based on this interpretation.

6. Ultimately, the appeal was allowed solely on the grounds of the CCE (Appeals) exceeding the show cause notice's scope, emphasizing the importance of adhering to the grounds specified in such notices for maintaining procedural fairness and legal validity in tax matters.