Customs, Excise and Gold Tribunal - Delhi
Bhushan Steel And Strips Ltd. vs Commissioner Of C. Ex. on 9 April, 1999
Equivalent citations: 1999(114)ELT564(TRI-DEL)
ORDER A.C.C. Unni, Member (J)
1. The Order passed by the Commissioner of Central Excise (Appeals), Ghaziabad dated 1-7-1997 is under challenge in this appeal. The Commissioner (Appeals) had confirmed the Or-der-in-Original passed by the Assistant Commissioner holding that the present appellants had cleared huge quantities of H.R. Coils in the guise of waste and scrap. He, therefore, confirmed a differential duty demand of Rs. 1,64,640/- and imposed a penalty of Rs. 25,000/- as per the Adjudication Order.
2. Brief facts are that the appellants were engaged in the manufacture of C.R. Coils, C.R. sheets, G.P. coils and G.P. sheets falling under Chapter 72 of the Schedule to the Central Excise Tariff. They were also availing of Modvat credit of duty paid on inputs. They produced as final products, C.R. Coils, Zinc and Aluminium. They were obtaining the inputs of raw-materials viz., H.R. coils from various manufacturers like SAIL, TISCO etc. During the course of manufacture, appellants are required to perform processes like slitting, pickling, cold rolling, annealing, skin passing, C.R. slitting and finally, packing. During these processes, some waste and scrap arose. For the manufacture of C.R. coils, the appellants were using as input duty paid H.R. coils and the manufacturing process involved slitting of H.R. coils and cutting them according to the required sizes of C.R. coils/sheets. According to the Department the appellants were clearing the cut pieces of H.R. coils as waste and scrap on a lower value than the value on which Modvat of duty had been availed. Since the manufacture of the final products, i.e., C.R. coils starts from the cutting of H.R. coils, the slitted and cut pieces of H.R. coils still remain as H.R. coils though of lesser width. Hence duty should have been discharged on the value of H.R. coils and not on the value of waste and scrap, according to the Department. Demand of differential duty on the value of cut/slit sheets of H.R. coils weighing 2884.680 M.Ts of the said material for the period July, 1995 to December, 1995 was therefore raised which was confirmed by lower authorities.
3. Shri J.S. Agarwal, ld. Advocate raised a preliminary point, viz., that the adjudication order passed by the Assistant Commissioner was an ex-parte order. The said order had been confirmed by the Commissioner (Appeals) without application of mind. He submits that there was a patent miscarriage of justice in the case and the principles of natural justice had been violated and on this ground alone the impugned order needs to be quashed even without going into merits. On merits, ld. Advocate contended that it was well known that every manufacturing activity generates some process waste and such waste does not fetch the same value as of prime material. In the case of the appellants, the slits had become waste and scrap and it was wrong on the part of the lower authorities to hold that the slits and cut pieces of H.R. coils were of prime quality. Further, there was no allegation against the appellants that they were cutting/slitting the bigger width coils/sheets in order to avail of Modvat credit. It would be obvious that no manufacturer would deliberately convert prime material into scrap. He referred to Note 6(a) of Section XV of the Central Excise Tariff which stated that metal waste and scrap on the manufacture or mechanical working of metals and metal goods were not usable as such because of breakage etc. In the instant case there was no dispute that the cuttings were generated in the course of process of manufacture. He also relied on the Tribunal decision in Tata/Oil Mills Co. v. C.C.E. [1998 (102) E.L.T. 479 (Tribunal)], in which the Tribunal had held that removal of torn waste cartons used in the packing of detergent powder manufactured by an assessee would not amount to removal of "inputs as such".
4. Shri Satnam Singh, ld. SDR, appearing for the respondent Collector submitted that the Assistant Collector had stated that he had gone through the show cause notice and case papers in the case of the present appellants and had stated that the issue had already been decided in another Or-der-in-Original viz., Order No. 164/96, dated 2-7-1996. Since the issue involved was the same, the Assistant Collector had proceeded to finalise the case in view of the earlier Order-in-Original. In the said Order-in-Original, in the case of Jawahar Metal Industries, the facts were identical and the Assistant Commissioner had found that the waste and scrap generated in the case of rolling of coils cannot be defined or classified in absolute terms. The facts in the instant case were not different and the authorities below had, following the decision of the Assistant Commissioner in identical facts, had come to the correct conclusion and therefore the impugned order was sustainable and valid, submitted the ld. SDR. ;
5. We have considered the submissions and on perusal of records, we find that the Assistant Commissioner has passed the adjudication order without giving any opportunity to the assessee of being heard. This is quite apparent from Paragraph 3 of the Order-in-Original in which the Asst. Commissioner had observed as under: "Since the issue involved is the same, I do not see any reason for giving further opportunity to the party and therefore finalise this case in view of my earlier Order-in-Original referred to above and accordingly confirm the demand of said amount".
6. There is no record of any personal hearing being granted to the appellants. It is to be borne in mind that the very purpose of issuing a show cause notice is to provide the noticee with an opportunity of putting forth his side of the case. The issuance of show cause notice is not an end itself. In fact, it is only the beginning of the proceedings. Further, even if the facts of a case may be apparently identical with the facts of another decided case, the conclusions reached in an earlier case cannot blindly be applied to a later case without hearing the party in the second case. The conclusion that the facts and issues arising in the second case are identical to the facts and issues of an earlier decided case can be drawn only after hearing the party in the second case. Since it is basic to adjudication that each case has to be decided on its merits, it was necessary for the adjudicating authority to provide an opportunity to the assessee to present his defence before coming to the conclusion that the facts and issues in the instant case were the same as those covered by the earlier decision. This is a case where violation of principles of natural justice is writ large on the face of the Order-in-Original. Inasmuch as the Order-in-Appeal also has not corrected the illegality of the original Order-in-Appeal it reflects lack of proper application of mind at the first appellate stage. We have therefore no hesitation in accepting the ld. Counsel's plea that the impugned order needs to be set aside for failure to observe the principles of natural justice.
7. As a result, we set aside the impugned order and remand the matter to the original adjudicating authority to decide the case de novo after observing the principles of natural justice.
8. Appeal is allowed by remand.