2018 (8) TMI 603 - AT - Central Excise

CENVAT Credit - denial on the ground that since the goods were sent for job work under exemption N/N. 214/86 C.E dated 25.03.1986 the said goods should be considered as exempted goods as per the provisions of Clause (d) of Rule 2 of the Cenvat Credit Rules 2004 - scope of SCN - Held that - The learned Commissioner (Appeals) found that he has proceeded against the appellant on the ground that the goods manufactured on job-work basis are not the final product of the appellant - Since such observations recorded in the impugned order were not the subject matter of dispute in the show-cause notice seeking for denial of Cenvat benefit the impugned order passed entirely on new ground cannot stand for judicial scrutiny. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over CENVAT credit availed by the appellant for goods manufactured on jobwork basis.
- Whether the goods manufactured on jobwork basis should be considered as final products of the appellant.
- Jurisdiction and scope of the show-cause notice in adjudication.

Analysis:
1. The appellant, engaged in manufacturing rolled products of iron and steel, availed CENVAT credit for duty paid on inputs and capital goods. The dispute arose when goods sent to a jobworker without duty payment led the department to seek recovery of wrongly availed credit based on Rule 6 of the Cenvat Credit Rules, 2004.

2. The Commissioner (Appeals) held that jobwork clearances cannot be treated as exempted goods, citing precedent. However, the Commissioner found fault with the appellant for not reflecting jobworked goods in returns, leading to the department's appeal. The appellant argued that the order went beyond the show-cause notice's scope, referencing relevant tribunal decisions to support their stance.

3. The Tribunal noted that the show-cause notice aimed to deny credit under a specific provision, but the Commissioner's order focused on a different aspect not raised in the notice. Consequently, the Tribunal found the order unsustainable as it delved into new grounds not part of the original dispute, leading to the appeal being allowed in favor of the appellant.

4. The judgment emphasizes the importance of adherence to the scope of show-cause notices in adjudication, ensuring that decisions are based on issues raised therein. By setting aside the impugned order for overstepping the notice's boundaries, the Tribunal upheld procedural fairness and legal principles in tax matters.