1998 (6) TMI 141 - AT - Central Excise

Summary

Issues:
Appeal against disallowance of deemed Modvat credit for purchasing railway scrap, Commissioner's authority under Section 35E(2) to direct filing of appeals beyond scope of show cause notices.

Analysis:
The case involved 8 appeals by M/s. Gurunanak Steel & Allied Industries and Others concerning the disallowance of deemed Modvat credit for purchasing railway scrap. The appellants argued that the condemned railway material did not qualify as rollable/re-rollable material for manufacturing their products. The Assistant Commissioner dropped the show cause notices based on the process of manufacture, leading to the Commissioner issuing directions for filing appeals. The Commissioner contended that the railway scrap was recognisable as non-duty paid material, affecting the entitlement to Modvat credit. The appellants challenged the Commissioner's authority under Section 35E(2) to go beyond the scope of the original orders.

The Commissioner (Appeals) maintained that the deemed credit orders were issued under Rule 57G(2), which specified conditions for allowing deemed credit, including the exclusion of non-duty paid stocks. The Commissioner argued that the issue of non-duty paid material was not a new ground but a relevant consideration under the rule.

The Tribunal emphasized that the scope of adjudication or review should align with the show cause notice's allegations. Referring to precedents, the Tribunal clarified that the Commissioner cannot order appeals based on grounds not specified in the show cause notice. The Tribunal highlighted the necessity for allegations regarding non-duty paid material to be raised in the notice for effective representation by the assessees. As the original notices did not address the non-duty paid character of the input, the Commissioner (Appeals) exceeded the authority under Section 35E(2) by directing appeals on that point. Consequently, all 8 appeals were allowed based on these findings and considerations.