ORDER
V.K. Ashtana, Member (T)
1. Since the two appeals, one by Revenue and the other by M/s. SRF Ltd., Chennai arise out of a common Order-in-Appeal No. 150/95(M), dated 25-10-1995, passed by Commissioner of Central Excise (Appeals), therefore they were heard together and are being disposed of by this common order.
2. Heard ld. Advocate Arvind P. Datar for appellant SRF Ltd. and ld. S.D.R. Shri Victor Thiagaraj for the department.
3. Briefly the facts are that M/s. SRF Ltd. were approached by another party M/s. Apollo Tyres at Trichur in Kerala State and agreed to supply Tyrecord fabrics under the provisions of Rule 191 BB, which was required by M/s. Apollo Tyres for manufacture of tyres to be exported. M/s. Apollo Tyres were holders of Advance Licence under the DEC scheme for import of yarn for this purpose. They applied for permission to their jurisdictional Assistant Collector of Central Excise at Trichur to receive yarn without payment of duty from M/s. MRF Ltd. under Rule 191BB read with Notification No. 33/90-C.E. (NT), dated 5-9-1990. The said Assistant Collector vide his certificate dated 7-10-1991 issued permission and certified under Rule 191BB read with the said Notification that M/s. Apollo Tyres were permitted to do the following :-
(a) To receive Nylon yarn without payment of excise duty from M/s. SRF, Madras against the said Advance Licence; (b) They were further permitted to get the said Nylon yarn processed into fabrics at the premises of the same MRF Ltd., Madras on job work basis on fulfilment of certain conditions specified and (c) For this concession, M/s. Apollo Tyres was required to furnish a Bank Guarantee for Rs. 5 lakhs against a specified bond for Rs. 61 lakhs. Copies of the said certificates were endorsed to the Collector of Central Excise, Madras as well as the Asstt. Collector of Central Excise, Madras-Ill Division being the jurisdictional Assistant Collector. Copy thereof was also submitted to the Collector of Central Excise, Cochin for confirmation of this certification.
4. Thereafter, the appellants in this case applied to their jurisdictional Assistant Collector viz. Madras-Ill Division for permission from this end for the said clearance of yarn after conversion into fabric as per para 2 of their application dated 14-10-1991. The said application was considered by the said Assistant Collector who vide his letter, dated 31-10-1991 permitted and with reference to the certificate of his counterpart of Trichur mentioned above permitted the present appellants to clear 250 tonnes of nylon yarn without payment of duty to M/s. Apollo Tyres Ltd., Trichur subject to all the conditions under Rule 191BB.
5. Removals continued accordingly and they were not of yarn but of fabrics under the specified conditions, on job work basis. This removals being non duty paid were under AR 3 and GP 1 and these removals were under physical control being counter signed by the Inspector of Central Excise concerned.
6. However, vide letter dated 6-1-1992 of the Assistant Commissioner, Trichur, M/s. Apollo Tyres were informed that the said permission granted was withdrawn with immediate effect and that they may apply to the Collector of Central Excise, Cochin for permission in this regard. Copy was also endorsed to the present appellant. By this time most of the consignments had already been cleared. Only one consignment which was of the balance amount was also cleared after the date of this letter, on 21-1-1992.
7. Vide a show cause notice dated 31-1-1992 issued by Assistant Collector, Madras-Ill Division, the appellants were required to show cause why duty aggregating to Rs. 70,65,625/- should not be demanded from them under Rule 9(2) of Central Excise duty read with Section 11A. We have perused the said show cause notice, it puts the appellants to notice with respect to the amount demanded, but does not set out any statement of facts or grounds on which the said amount is demanded. Upto this stage the facts as narrated above are not in dispute.
8. The said show cause notice was adjudicated upon by the Assistant Commissioner, Madras-Ill Division vide order dated 15-2-1995 wherein the entire demand was confirmed under Section 11A on the following grounds that-
(a) the permission obtained by M/s. Apollo Tyres from the Assistant Collector of Central Excise, Trichur was subject to confirmation by the Collector of Central Excise, Cochin; (b) their own order allowed the appellants to clear nylon yarn, but what was cleared was fabrics and not yarn & (c) though the order of Assistant Collector, Trichur allowed M/s. Apollo Tyres for conversion of this yarn on job work basis, since the product was to be cleared from Madras, the permission of the jurisdictional Assistant Collector at Madras for job work (in this case the adjudicating authority) would have been necessary to clear the fabrics without payment of duty; it was not obtained by the appellants.
9. The present appellant went in appeal to the Commissioner (Appeals) who vide his Order-in-Appeal No. 211/95 (M), dated 25-10-1995 set aside the demand in the order-in-original for Rs. 60,15,625/- on Nylon yarn but confirmed the duty demand of Rs. 10,50,000/- on the fabrics cleared by the appellants. This was on the ground that the said yarn was removed for captive consumption under Rule 9 read with Rule 49 in compliance with the provisions of 191BB and therefore, this removal was not tainted. While coming to this conclusion he considered the wordings of the Advance Intermediate Licence held by M/s. Apollo Tyres (who were not a party to this appeal) and found that because M/s. Apollo Tyres by the said licence were allowed nylon yarn, but what was received by them was fabrics therefore, the said licence did not cover these fabrics.
10. The appellants M/s. SRF Ltd. as well as the Department are aggrieved by the said order-in-appeal are now before us.
11. Heard ld. Advocate, Shri Arvind Datar who submitted that the order-in-original of the Assistant Collector is illegal because it traverses beyond the show cause notice. Since the show cause notice does not alleged any contravention of Rule 191BB, therefore since the grounds on which he confirms the said duty demand in the said order-in-original are not at all alleged in the said show cause notice, so the order is beyond the show cause notice. That in itself needs to be quashed. He cited the case of Raphael Pharmaceuticals Pvt. Ltd. as reported in 1988 (38) E.L.T. 11 (A.P.), M/s WIMCO Ltd. v. Union of India as reported in 1980 (6) E.L.T. 235 (Bom.), M/s. Korula Rubber Co. Pvt. Ltd., Bombay v. C.C.E., Bombay as reported in 1987 (32) E.L.T. 216 (T) and M/s. Srikant Haldar v. C.C.E., as reported in 1991 (53) E.L.T. 425 (T). His second submission was that under the provisions of Rule 191BB read with Notification No. 33/90, the duty liability on the goods cleared would be only on the consignee, i.e. M/s. Apollo Tyres. The said consignee had already executed a bond in this respect as prescribed under the said notification, therefore no duty liability lies on the appellants. Thirdly, he argued that all the principles of Chapter 10 of Central Excise rules would also be applicable to Rules 191BB and in that respect cited the case of Siemens Ltd. v. C.C.E. as reported in 1994 (70) E.L.T. 305 (T) and C.C.E. v. Ferro Alloys Corporation Ltd. as reported in 1994 (71) E.L.T. 931. He further submitted that plea of fabrics not covered and A.C. having no authority to grant permission under Rule 191BB were technical, as the clearances were made after obtaining the relevant permission from both the Assistant Collectors. Finally he said that the Rule 191BB itself was framed for export promotion measures and nowhere it has been alleged that the entire quantity cleared to M/s. Apollo Tyres was not used in tyres which were subsequently exported.
12. Heard ld. SDR. He reiterated all the grounds of the Department’s appeal and stressed in particular that since the advance licence was for nylon yarn it was not correct that fabrics were removed without payment of duty from M/s. SRF Ltd. Secondly, he submitted that the last consignment was removed even after the permission had been withdrawn. He further submitted that Rule 9 clearly lays down that excisable goods cannot be removed for further manufacture of other goods without payment of duty. He further submitted that the permission letter under Rule 191BB issued by Assistant Collector, Central Excise, Trichur was ab initio void because the rule clearly says that only the Collector has powers to issue such a permission.
13. We have carefully considered the arguments on both sides. We have also perused the show cause notice in question. A plain reading of the show cause notice shows that certain amount as specified therein has been demanded under Rule 9(2), read with Section 11 A. We find that there is nothing in the body of the show cause notice which explains on what grounds the said demands have been raised. There is no annexure or statement of facts or grounds of demand also annexed to this show cause notice as is normally done. We also find that there is no mention of violation of Rule 191BB in this show cause notice. When we consider the plea of ld. Advocate for appellants that the order-in-original has therefore proceeded beyond the scope of show cause notice, we find that this argument carries a lot of weight. Since Rule 191BB is not even mentioned in the show cause notice or in any annexure thereto, let alone there be any allegation of violation of that Rule, therefore there is no grounds set out in the said show cause notice for demanding the duty. As against this, in the order-in-original, the Assistant Collector has based his findings and decisions on the grounds already enumerated above, each one of which cover the provisions of Rule 191BB. We are, therefore clearly led to conclude that the order-in-original goes beyond the scope of the show cause notice and on this ground alone there has been a miscarriage of the principles of natural justice and the matter needs to be remanded to the original authority.
14. In view of this violation of principles of natural justice, we do not feel it necessary to consider the other arguments either of the department’s appeal or of the appeal of the appellants. Therefore, without passing any order upon any merit of the case, we set aside both the impugned order-in-appeal as well as the order-in-original and remand the matter to the original adjudicating authority for consideration de now in terms of law.