2023 (5) TMI 1020 - AT - Central Excise

Scope of SCN - Setting a new case which travelled beyond the SCN - Levy of Excise Duty - activity of flock printing done with the aid of power operated machine - process amounting to manufacture or not - HELD THAT - From the order of the CESTAT remanding the matter to the original authority, it is evident that the matter was remanded with specific direction to determine the correct classification under heading 5907 after consideration of the Chapter Note 5(c) to the Chapter 59 of the Central Excise Tariff. Original authority has clearly observed that the said chapter note was applicable in the case and the goods were not classifiable under chapter 5907. Having done so he should have dropped the demand which was made under heading 5907.12. However without assigning any reason he determines the classification under Chapter 54 suo motto without putting the appellant to notice - the submissions made by the counsel for the appellants, that adjudicating authority was barred from setting out a new case which travelled beyond in show cause notice agreed upon. Impugned order in most mechanical manner confirms the findings recorded by the original authority without giving any thought or reason - there are no merits in the impugned order - appeal allowed.

Issues Involved:
1. Classification of flock printed fabrics
2. Use of power in the manufacturing process
3. Applicability of Chapter Note 5(c) to Chapter 59 of the Central Excise Tariff Act, 1985
4. Determination of correct tariff heading
5. Scope of remand proceedings and adherence to show cause notice

Detailed Analysis:

1. Classification of Flock Printed Fabrics:
The core issue revolves around the classification of flock printed fabrics. The department initially classified the goods under heading 5907.12, attracting a duty of 16% ad valorem, while the assessee argued for classification under heading 5907.30, which attracts nil duty. The Tribunal directed the adjudicating authority to reconsider the classification, taking into account the facts and Chapter Note 5(c) to Chapter 59.

2. Use of Power in the Manufacturing Process:
The contention was whether the use of power in the manufacturing process of flock printed fabrics subjected the goods to excise duty. The department argued that the process of removing extra flock using an electrostatic box constituted the use of power, making the goods excisable. The assessee maintained that the primary printing process was manual, and the electrostatic box was only used for removing excess flock, which should not attract excise duty.

3. Applicability of Chapter Note 5(c) to Chapter 59:
Chapter Note 5(c) to Chapter 59 was a pivotal point in determining the classification. The Tribunal noted that this point was not considered by the lower authorities and remanded the matter for fresh consideration. The adjudicating authority and Commissioner (Appeals) eventually concluded that the goods did not fall under heading 5907 due to the applicability of Chapter Note 5(c).

4. Determination of Correct Tariff Heading:
Upon remand, the original authority classified the goods under heading 5406.23, which was not part of the initial show cause notice. The appellant argued that this reclassification was beyond the scope of the notice and against settled legal principles. The Tribunal agreed, stating that the adjudicating authority could not make out a new case in remand proceedings that was not part of the original show cause notice.

5. Scope of Remand Proceedings and Adherence to Show Cause Notice:
The Tribunal emphasized that the remand was specifically to reconsider the classification under heading 5907, considering Chapter Note 5(c). The original authority's decision to classify the goods under Chapter 54 without notifying the appellant was beyond the scope of the remand and the show cause notice. The Tribunal cited several legal precedents affirming that the burden of determining the correct classification lies with the revenue, and new grounds cannot be introduced in remand proceedings.

Conclusion:
The Tribunal set aside the impugned order, agreeing with the appellant that the adjudicating authority had exceeded its mandate by reclassifying the goods under a new heading without proper notice. The appeal was allowed, and the order confirming the demand was annulled. The Tribunal reiterated the importance of adhering to the scope of remand and the original show cause notice, ensuring that the principles of natural justice are upheld.

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