2004 (10) TMI 505 - AT - Central Excise

Revenue's Appeal Denied Over Modvat Credit Denial; New Grounds Rejected. Show Cause Notice Specificity Emphasized.

The appeal by the Revenue, challenging the denial of Modvat credit to the respondents, was dismissed. The judge upheld the decision in favor of the ... Cenvat/Modvat - Inputs Issues: Denial of Modvat credit to the respondentsIn this case, the main issue revolves around the denial of Modvat credit to the respondents by the Revenue. The appeal was filed against the impugned order-in-appeal, specifically focusing on the restriction of Modvat credit by the Revenue to the respondents.Analysis:The learned JDR representing the Revenue argued that Notification No. 27/2000-C.E. (N.T.) was in force at the relevant time, limiting the Modvat credit that could be availed by the assessee/purchaser of inputs to a specified rate. Consequently, the respondents were not entitled to full Modvat credit on inputs received after the issuance of this notification, but only to the extent specified therein.Upon reviewing the arguments from both sides and examining the records, the judge noted that the show cause notice issued by the Revenue did not rely on Notification No. 27/2000-C.E. (N.T.) to deny Modvat credit to the respondents. Instead, the Revenue based its denial on Notification No. 6/2001-C.E. (N.T.), dated 1-3-2001. The Commissioner (Appeals) allowed Modvat credit to the respondents, considering that they received inputs with duty paid invoices, availed Modvat credit, returned defective goods to the manufacturer after reversing the credit, and paying duty for rectification.The judge emphasized that the Revenue is bound by the contents of the show cause notice and cannot introduce new grounds beyond what was initially notified. As Notification No. 27/2000-C.E. (N.T.) was not part of the show cause notice, it could not be considered for denying Modvat credit to the respondents. Therefore, the judge found no illegality in the order passed by the Commissioner (Appeals) and upheld the decision.Consequently, the appeal by the Revenue was dismissed, affirming the decision in favor of the respondents. The judgment highlights the importance of adherence to the grounds specified in the show cause notice and restricts the Revenue from introducing new grounds during the appeal process.