2003 (9) TMI 578 - AT - Central Excise

Tribunal overturns denial of Modvat credit for procedural fairness, stresses adherence to show cause charges.

The Tribunal set aside the Commissioner's order denying Modvat credit based on dip measurement methodology and relying on manual weighment method beyond ... Adjudication - Scope Issues: Modvat credit denial based on dip measurement methodology; Admissibility of manual weighment method in absence of documentary evidence; Jurisdiction of adjudicating authority beyond show cause notice charges.In this case, the appellants availed Modvat credit on imported items as inputs, supported by gate passes, delivery challans, and weighment slips from their depot at Kandla. A show cause notice was issued proposing to deny credit on certain quantities of inputs not in conformity with dip measurement of storage tanks. The Commissioner, after considering submissions, concluded that the dip reading methodology was unreliable for computing shortages. Instead, he relied on the manual weighment method as per the Tribunal decision in Bombay Dyeing case. The shortage was determined based on reports for August 2001, resulting in a duty demand, penalty, and interest. The Commissioner refrained from penalizing the Vice-President (Finance). The appeal challenged the methodology used and the charges beyond the show cause notice.The learned advocate for the appellants argued that the demands were based on assumptions derived from August 2001 reports, not mentioned in the show cause notice. The Tribunal found that the Commissioner had proceeded beyond the charges in the notice, violating the principle that the adjudicating authority cannot go beyond the show cause notice charges. Therefore, the Tribunal set aside the order and allowed the appeal, providing consequential relief as per law. The decision highlights the importance of adhering to the charges specified in the show cause notice during adjudication to ensure procedural fairness and jurisdictional integrity.