Adjudication Order Can't Travel Beyond Show Cause Notice: CESTAT

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the adjudication order cannot travel beyond the scope of a show cause notice.

The bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that when, with regard to any charge or assignment, the noticee is not put to notice, that issue cannot be decided in the adjudication order.

On the basis of the investigation and recording of the statements of the employees of the appellant/assessee, a show cause notice was issued to the appellant demanding an amount of Rs. 1,40,23,501, which is 10% of the clearance value of the exempted product under Rule 6(3) of the Cenvat Credit Rules, 2004 (CCR), and Rs. 40,66,510 pertaining to credit availed on capital goods allegedly used exclusively in the manufacture of the exempted product and lying in balance, along with interest and penalties. The notice proposed to impose a personal penalty on the other two appellants under Rule 26 of the Central Excise Rules, 2002.

Earlier, a show cause notice was issued to the appellant, demanding a credit of Rs. 35,82,694 attributable to inputs and input services used in the manufacture of an exempted product, along with interest and penalties. After remand by the Tribunal, the adjudicating authority confirmed the demand of Rs. 9,48,034 along with interest and an equal penalty, which the appellant has accepted, and proceedings related to the cenvat credit attributable to the exempted goods were concluded.

The appellant contended that the show cause notice proposed to demand an amount of Rs. 1,40,23,501/- being 10% of the value of the cleared exempted goods under Rule 6(3) Cenvat Credit Rules, 2004 whereas the adjudicating authority has gone altogether on different ground and ordered the lapse of credit of Rs. 1, 20,80,589/- lying in balance as of December 7, 2008. It is a completely different issue that was not raised in the show cause notice; therefore, orders that travel beyond the show cause notice, irrespective of any fact or legal issue, will not be sustained.

The tribunal noted that the show cause notice has demanded 10% under Rule 6(3) of the Cenvat Credit Rules on the ground that the appellant has availed Cenvat credit on common input services that were used in the exempted and dutiable final product. However, in the adjudication order, the demand of Rs. 1,20,80,589/- was confirmed on the ground that the said amount was lying in the balance as of December 7, 2008, when the appellant opted for the exemption, and according to Rule 11(3) of the Cenvat Credit Rules, 2004, the said amount has lapsed.

Thus, the CESTAT has held that the adjudication order has clearly travelled beyond the scope of show cause notice.

Counsel For Appellant: Prakash Shah

Counsel For Respondent: Ashok Thanvi

Case Title: Faze Three Limited Versus C.C.E & S.T.-Silvasa

Case No.: Excise Appeal No. 11871 of 2015 - DB

Click Here To Read The Order