2023 (7) TMI 1115 - AT - Central Excise

Scope of SCN - demand confirmed on the grounds which were never subject matter of the impugned show cause notice - Reversal of CENVAT Credit - inputs or input service used in manufacture of dutiable goods or in providing output services as well as exempt goods - non-maintenance of separate records - principles of natural justice - HELD THAT - The impugned order-in-original has violated the principles of natural justice as the verification reports on the basis of which the demand has been confirmed, considering that the principal manufacturer has availed exemption notification while clearing the finished goods and therefore, the intermediate goods manufactured by the job worker would also hit by the same and therefore, the Cenvat credit need to be reversed by the appellant as per the provisions of Rule 6(3) of Cenvat Credit Rules, 2004. The principal manufacturer Le. M/s. Metal and Steel Factory, has cleared the final product without payment of duty, and the fact that the Noticee had not exercised any option as envisaged under Rule 6(3) of the CCR, and had availed and utilized Cenvat Credit on the inputs and input services used for of both dutiable products (their own) and exempted products (job worked goods), without maintaining separate records as envisaged under Rule 6(2) of the CCR. Therefore, the Noticee is liable to pay an amount @ 5% of the value of exempted products for the period from January 2009 to 31.03.2012 and @ 6% from 01.04.2012 to 31.03.2013 as per provisions of Rule 6(3) of the CCR, as amended for the job work carried out in respect of M/s. Metal and Steel Factory, Ishapur West Bengal. The verification report reveals that the Noticee for the period from January, 2009 to March, 2013 have carried out the job work without payment of duty in respect of M/s. Metal and Steel Factory. The basis on which the Adjudicating Authority has confirmed the demand has never been subject matter of the show cause notice and therefore, we hold that Adjudicating Authority has travelled beyond the scope of the show cause notice and therefore, violated the principles of natural justice by not disclosing the verification report to the appellant, this clearly amounts to an act of violation of the principles of natural justice. The impugned order-in-original set aside - matter remanded to the Adjudicating Authority for de-novo adjudication.

Summary

Issues Involved:
1. Whether the Commissioner (Appeals) has traveled beyond the scope of the show cause notice.
2. Whether credit is required to be reversed under Rule 6 of the Cenvat Credit Rules, 2004.
3. Whether the extended period of limitation invoked is correct.

Summary:

Issue 1: Scope of Show Cause Notice
The appellant contended that the learned Commissioner (Appeals) traveled beyond the scope of the show cause notice, violating principles of natural justice. The show cause notice primarily questioned the reversal of Cenvat credit under Rule 6 of Cenvat Credit Rules, 2004 for clearances made under Notification No. 214/86-CE and Notification No. 22/2003-CE. The Adjudicating Authority confirmed the demand based on verification reports, which were not provided to the appellant, thus violating principles of natural justice. The Tribunal found that the order-in-original indeed traveled beyond the scope of the show cause notice and set aside the order for de-novo adjudication.

Issue 2: Reversal of Credit
The appellant argued that the reversal of credit under Rule 6 of Cenvat Credit Rules, 2004 was not required for clearances made under Notification No. 214/86-CE and Notification No. 22/2003-CE. The learned Commissioner had initially held that no reversal was required for goods cleared to 100% EOUs and domestic manufacturers where the principal manufacturer discharged the duty. However, the demand of Rs. 84,20,615/- was confirmed for clearances made to M/s. Metal and Steel Factory, Ishapore, availing exemption under Notification No. 62/1995-CE. The Tribunal did not delve into the merits but remanded the matter for de-novo adjudication.

Issue 3: Extended Period of Limitation
The appellant argued that the extended period of limitation was incorrectly invoked as they had always complied with the procedures under Notification No. 214/86-CE. The show cause notice alleged deliberate suppression of facts to evade payment. The Tribunal did not specifically address this issue in the final order but remanded the matter for de-novo adjudication, implying that all procedural and substantive aspects would be reconsidered.

Conclusion:
The Tribunal set aside the impugned order-in-original and remanded the matter to the Adjudicating Authority for de-novo adjudication, emphasizing that the principles of natural justice were violated as the order-in-original traveled beyond the scope of the show cause notice and relied on undisclosed verification reports.