Show cause notice scope and corroborated evidence requirements barred duty confirmation, clandestine removal findings, and related penalties.

Duty confirmation was held unsustainable where the adjudicating authority relied on a computation method not disclosed in the show cause notice, as this travelled beyond the notice and denied fair defence. Findings of clandestine manufacture and removal were also not sustained because private register entries, without corroborative evidence, were insufficient and the overlapping demand period was not properly addressed. The appellants' claims to SSI exemption and the benefit of section 4(4)(d)(ii) required consideration but were left unexamined. Penalty under Rule 209A was not justified without a clear finding on knowledge of the non-duty-paid nature of the goods. The adjudication was set aside and remanded for fresh decision after hearing the appellants.

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Issues: Whether the adjudicating authority could confirm duty on a basis different from that stated in the show cause notice; whether the finding of clandestine manufacture and removal could stand merely on private register entries without corroborative evidence and without addressing overlapping duty periods; whether the claim to SSI exemption and the benefit of section 4(4)(d)(ii) of the Central Excise Act, 1944 required consideration; and whether penalty under Rule 209A of the Central Excise Rules, 1944 could be sustained against the dealer-appellants without proper finding on knowledge of the non-duty-paid nature of the goods.

Issue (i): Whether the adjudicating authority could confirm duty on a basis different from that stated in the show cause notice.

Analysis: The demand in the notice was worked out on the basis of sugar consumption, whereas the adjudication proceeded on a different footing by relying on milk and skimmed milk powder consumption. A duty confirmation based on a new method of computation, never put to the notice of the appellants, amounts to travelling beyond the show cause notice and denies a proper opportunity of defence.

Conclusion: The duty confirmation on a ground not contained in the show cause notice was unsustainable, in favour of the assessee.

Issue (ii): Whether the finding of clandestine manufacture and removal could stand merely on private register entries without corroborative evidence and without addressing overlapping duty periods.

Analysis: Private register entries, by themselves, were treated as insufficient to establish clandestine production and removal in the absence of corroboration from other reliable material. The adjudicating authority also failed to deal with the plea that the period for which a separate demand was made overlapped with the larger demand already confirmed, and the order was found to rest on presumptions and assumptions rather than tangible evidence.

Conclusion: The finding of clandestine removal and the overlapping demand were not properly sustained, in favour of the assessee.

Issue (iii): Whether the claim to SSI exemption and the benefit of section 4(4)(d)(ii) of the Central Excise Act, 1944 required consideration.

Analysis: The appellants' plea for SSI exemption and for the benefit of section 4(4)(d)(ii) was noted as having been left out without proper discussion by the adjudicating authority. The omission showed non-consideration of material defences relevant to the liability determination.

Conclusion: The plea required proper adjudication and remained unaddressed, in favour of the assessee.

Issue (iv): Whether penalty under Rule 209A of the Central Excise Rules, 1944 could be sustained against the dealer-appellants without proper finding on knowledge of the non-duty-paid nature of the goods.

Analysis: Penalty under Rule 209A depends on a proper finding regarding knowledge of the non-duty-paid character of the goods. The order was found to impose penalty selectively without a clear evidentiary basis or a substantial distinction among the dealer-appellants, and without adequately appreciating their knowledge.

Conclusion: The penalties under Rule 209A were not properly justified, in favour of the assessee.

Final Conclusion: The adjudication was set aside and the matter was remanded to the original authority for fresh decision after hearing the appellants.

Ratio Decidendi: An adjudication under central excise law cannot be sustained when it travels beyond the scope of the show cause notice, and findings of clandestine removal must rest on corroborated evidence rather than unverified assumptions.

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