Commissioner of Central Excise vs Nestle India Ltd.

S.C. Dharmadhikari, J.—The application was moved by the Commissioner of Customs and Central Excise, Goa, on the basis of the observations made on 29.06.2001 in an Order of the Division Bench of this Court. The Order of the Division Bench directs that u/s 35H(1) of the Central Excise Act, 1944, the Appellate Tribunal should refer to the High Court the question of law as referred in Para 8 of the Order.

In pursuance of the direction of this Court, the Tribunal has referred the following questions of law for opinion of this Court:

Whether the Show cause notice issued under Rule 57U of the Central Excise Rules 1944, requires to state any ground on which the denial of credit is founded ?

Whether from the Show Cause Notice issued under Rule 57U of the Central Excise Rules 1944, read with the reply filed by the assessee on 23.8.95 could it be said that the Assistant Commissioner had travelled beyond the allegations in the said Show Cause Notice ?

Whether the Show Cause Notice issued under Rule 57U of the Central Excise Rules 1944, could be said to be bad in law as regards the goods specified in annexure B thereto for want of a specific ground mentioned in the notice that the goods were not admissible in terms of Rule 57Q of the said rules ?

Whether the Show Cause Notice issued under Rule 57U of the Central Excise Rules 1944, for recovery of inadmissible Modvat Credit availed of by the assessee, could have been held as bad by CEGAT merely on the ground of not mentioning in the Show Cause Notice that the goods were not covered under 57 Q and whether the CEGAT had jurisdiction to override the express provisions of Rule 57U ?

The assessee is M/s. Nestle India Ltd. It is duly served but none has appeared on its behalf. Office report shows that service is complete and, thereafter, this application is placed before us for hearing and final disposal.

We have heard Shri C. A. Ferreira, learned Assistant Solicitor General, appearing for the applicant/revenue. With his able assistance, we have perused the application and the annexures thereto including the Order of the Customs, Excise & Gold (Control) Appellate Tribunal, West Regional Bench, Mumbai.

The appeal together with stay application was placed before the Tribunal on 11.02.2000.

The respondent-assessee appealed to the Tribunal against the Order passed by the Commissioner (Appeals), Goa.

It appears that a show cause notice cum demand was served on the assessee. The assessee is manufacturing excisable goods falling under Chapter Sub-Heading 1905.11 of the Central Excise Tariff Act, 1985, for short, referred to as ''Tariff Act''. The allegations in the show cause notice are that the assessee has contravened the provisions of the Central Excise and Salt Act and the Rules made thereunder by availing Modvat Credit to the tune of Rs. 5,29,411.20 on Capital Goods as detailed in Annexure A to the show cause notice. This credit is inadmissible in terms of Rule 57Q of the Central Excise Rules 1944.

The assessee has also allegedly availed Modvat Credit amounting to Rs. 12,99,668.57 on Capital Goods as detailed in Annexure B to the show cause notice which have not been declared by them. Thereby, they have contravened the provisions of Rule 57T(1) of the Central Excise Rules, 1944.

Lastly, it was alleged that the assessee has taken Modvat Credit to the tune of Rs. 96,775.00 on Capital Goods as detailed in annexure C to the show cause notice which credit is not admissible in terms of Rule 57Q. These goods also have not been declared by them as required under Rule 57T(1) of the Rules.

It is under such circumstances that the assessee was directed to show cause as to why the total amount of Modvat Credit should not be denied and recovered from them under Rule 57U of the Rules read with Section 11A of the Central Excise Act.

The assessee replied to the show cause notice and the Asst. Commissioner by his Order dated 27.01.1999 held that the Modvat Credit amounting to Rs. 15,15,352.77 is inadmissible under Rule 57Q of the Rules and confirmed the demand accordingly. He directed the assessee to pay the amount confirmed by him forthwith.

Aggrieved by this Order, the assessee approached the Commissioner of Central Excise (Appeals) Mumbai and after hearing both sides, the Commissioner (Appeals) set aside the above Order and remanded the matter for De novo consideration as per directions contained in his Order. The Commissioner (Appeals) based his conclusion of remand on the findings recorded in Para 4 and 5 of his Order delivered on 30.06.1999.

The assessee aggrieved by the Order of remand by the Commissioner (Appeals), then approached the Tribunal and the Tribunal at the stage of hearing of the stay application, heard the appeal itself finally by consent of the Assessee and the Departmental Representative.

The Tribunal by the Order dated 11.02.2000, allowed the assessee''s appeal and quashed and set aside the Order of the Commissioner Central Excise (Appeals), remanding the matter back to the Department for De Novo consideration.

The only point before the Tribunal was whether the allegations in the show cause notice have been transgressed by the Asst. Commissioner in confirming the demand as contended by the assessee. It was brought to the notice of the Tribunal that the show cause notice alleges that as far as the goods covered under annexure B, the allegations were that they were not declared. However, during the course of the proceedings, a declaration was filed and the Asst. Commissioner took upon himself the task of considering as to whether the assessee is eligible to Modvat Credit on the goods mentioned in annexure B. Having observed that the allegations in the show cause notice are of non-declaration and restricted to that, then it was not open for the Asst. Commissioner to have gone further and adjudicated the matter on the basis of the eligibility of Modvat Credit. That was plainly impermissible inasmuch as the Department invoked Section 11A read with relevant Rules on the basis that there is no declaration. Once there was a declaration on record, then, in the absence of clear allegations in the show cause notice, it was not open for the Asst. Commissioner to have considered the issue of eligibility of Modvat Credit. That being admittedly done by him in so far as goods covered by annexure B, his Order was unsustainable. The Order being patently unsustainable should have been quashed and set aside by the Appellate Authority namely the Commissioner (Appeals), instead, he erred in remanding the matter for De Novo consideration.

What we find from the Order of the Tribunal is that its ultimate conclusion is based on the findings of fact recorded by the Asst. Commissioner and the Commissioner (Appeals). The Asst. Commissioner having observed that there is a declaration on record, could not have gone ahead and considered the issue of eligibility in the absence of clear allegations in that behalf. That being the case, he clearly transgressed the powers conferred and acted beyond jurisdiction by taking into account matters which were not alleged in the show cause notice. That is a factual position emerging from the record. That factual position having been noticed, the Tribunal has rightly quashed and set aside the Order of the Commissioner (Appeals) and allowed the assessee''s appeal in toto. We are in agreement with the factual findings recorded in Para 4 and 5 of the Tribunal''s Order based as they are on the materials on record. There is no substantial question of law in the peculiar facts of this case which requires any answer. The matter turns on its own facts and, therefore, we need not answer the questions of law referred to above.

In the result, the reference is returned and disposed off accordingly.