2004 (2) TMI 516 - AT - Central Excise

Tribunal overturns duty demand & penalty, citing lack of clarity in notice and due process violation.

The Tribunal set aside the Commissioner's order demanding duty on scrapped machinery and imposing a penalty, ruling in favor of the appellant. The ... Show cause notice Issues:Appeal against Order-in-Appeal demanding duty on scrapped machinery under Section 11A of Central Excise Act, alleging violations of Central Excise Rules, imposition of penalty under Rule 57S(2)(c) of Central Excise Rules, defective show cause notice, incorrect provisions mentioned in the notice.Analysis:The appeal was filed against an Order-in-Appeal demanding duty on scrapped machinery by M/s. Nandi Sahakari Sakkare Karkhane Niyamit, Bijapur. The appellant's advocate argued that the scrapped machinery was not generated during the manufacturing process, hence duty recovery under Section 11A of the Central Excise Act was not justified. He cited precedents to support his argument and contended that the demand under Rule 57S(2)(c) was beyond the scope of the show cause notice. The Commissioner (Appeals) upheld the demand and penalty based on Modvat availed capital goods, which was not explicitly mentioned in the notice, leading to a challenge by the appellant.The Revenue, represented by Shri Narasimha Murthy, defended the demand by pointing out that the show cause notice mentioned the scrapped MS scrap valued at Rs. 5,88,429, generated from old capital goods with Modvat credit. Despite not invoking Rule 57S(2)(c) in the notice, the Revenue argued that the incorrect section reference did not invalidate the demand.The Tribunal carefully analyzed the submissions and found that the show cause notice lacked clarity regarding the scrapped capital goods and the manufacturing process generating the scrap. The notice did not specify the relevant provisions accurately, leading to a lack of opportunity for the appellant to defend against the allegations. As Rule 57S was not invoked in the notice or the original order, the Commissioner (Appeals) could not introduce it at the appellate stage. Therefore, the Commissioner's order invoking a different rule not mentioned in the notice was deemed contrary to the law. Consequently, the Tribunal set aside the Commissioner's order, ruling in favor of the appellant and allowing the appeal.In conclusion, the Tribunal's judgment focused on the importance of a clear and accurate show cause notice, ensuring that the allegations and provisions cited provide the appellant with a fair opportunity to respond. The incorrect invocation of provisions not mentioned in the notice was considered a violation of due process, leading to the reversal of the Commissioner's decision.