2017 (10) TMI 891 - AT - Central Excise

Tribunal grants appeal on procedural unfairness in duty rate decision exceeding original scope.

The Tribunal set aside the demand and allowed the appeal with consequential relief as the Commissioner's decision to disallow the benefit of the ... Benefit of N/N. 6/2002-CE dated 1.3.2002 as amended r/w Condition No. 14 thereof - it was alleged that that the appellant has not fulfilled the first requirement / condition in the notification which is that the paper manufactured should start from the stage of pulp in the factory - scope of SCN - Held that: - the controversy has been put to an end by the Board by clarifying that if pulp is manufactured of the required specification whether or not pulp itself is manufactured in the same factory, the benefit of the notification would be available to the manufacturer. However, it is observed by the Commissioner that the concessional rate of duty of 8% / nil during the years 2004 05 to 2007 08 cannot be extended to the appellant in the absence of proof of that pulp contains not less than 75% by weight of pulp made from materials other than bamboo, hard wood, soft wood etc. Thus, the Commissioner has proceeded to confirm the demand on the ground which is absent in the show cause notice. It is indeed correct that the Commissioner has travelled beyond the show cause notice. Demand set aside - appeal allowed - decided in favor of appellant. Issues:1. Eligibility for availing concessional rate of duty under specific notifications based on conditions.2. Allegation of non-fulfillment of condition related to starting paper manufacture from the stage of pulp.3. Disallowance of benefit due to lack of proof regarding pulp composition.4. Commissioner's decision based on grounds not raised in the show cause notice.Issue 1: Eligibility for availing concessional rate of duty under specific notifications based on conditions:The appellants were engaged in the manufacture of kraft paper and were availing concessional rates of duty under specific notifications. The notifications required specific conditions to be fulfilled to avail the benefit, including the manufacture of paper starting from the stage of pulp and the composition of the pulp.Issue 2: Allegation of non-fulfillment of condition related to starting paper manufacture from the stage of pulp:Show cause notices were issued alleging that the appellant did not fulfill the condition of starting paper manufacture from the stage of pulp as required by the notifications. The original authority confirmed the demand raised based on this allegation, along with interest and penalties.Issue 3: Disallowance of benefit due to lack of proof regarding pulp composition:The Commissioner disallowed the benefit of the concessional rate of duty due to the lack of proof that the pulp contained not less than 75% by weight of pulp made from materials other than specified types of wood. This ground was not raised in the show cause notice, and the appellant was not given an opportunity to defend or establish their case on this aspect.Issue 4: Commissioner's decision based on grounds not raised in the show cause notice:The Commissioner's decision to confirm the demand based on the pulp composition issue, which was not part of the original allegation in the show cause notice, was challenged. The appellant argued that the Commissioner had exceeded the scope of the notice by considering this new ground. The Tribunal found in favor of the appellant, setting aside the demand and allowing the appeal with consequential relief.This detailed analysis of the judgment highlights the issues involved, the arguments presented by both sides, and the Tribunal's decision based on the legal interpretation of the notifications and procedural fairness in adjudication.