Scope of show-cause notice limits interest recovery where no duty or interest demand was proposed.

Interest demand cannot be sustained where the show-cause notice proposed only recovery of wrongly taken Modvat credit and penalty, and did not propose recovery of duty or interest. The adjudicating and appellate authorities travelled beyond the scope of the notice by ordering interest under the Central Excise Act. As no notice was issued for duty or interest, the demand was held unsustainable and set aside. The penalty was maintained.

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Issues: Whether interest could be recovered when the show-cause notice was confined to recovery of wrongly taken Modvat credit and penalty, and no notice was issued for duty, interest or such recovery.

Analysis: The notice proposed recovery only of the wrongly mentioned Modvat credit and penalty under the relevant central excise rules. The adjudicating authority and the appellate authority, however, ordered recovery of interest under the Central Excise Act. Since no show-cause notice had been issued for recovery of duty, the demand of interest on such duty could not be sustained. An authority cannot travel beyond the scope of the show-cause notice.

Conclusion: The demand of interest was not sustainable and was set aside. The penalty was maintained.

Final Conclusion: The appeal succeeded to the extent that the interest demand was quashed, while the penalty order was left undisturbed.

Ratio Decidendi: A demand of interest cannot be sustained where the show-cause notice did not propose recovery of the underlying duty or interest and the adjudicating authority travels beyond the notice.

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