Small scale exemption cannot be denied on a new ground beyond the notice and limited remand, where earlier exemption stood final.

A denial of small scale exemption cannot rest on a ground not raised in the show cause notice or covered by a limited remand, especially where earlier adjudication had already accepted the assessee's availing of Notification No. 175/86 and that position had attained finality. The remand was confined to whether the exemption had in fact been availed during the relevant earlier period, and the lower authority exceeded that scope by rejecting the exemption for absence of a Central Excise licence. Such a fresh basis could not reopen a settled factual issue in subsequent duty proceedings. The exemption denial was therefore unsustainable, and the assessee remained entitled to the benefit for the relevant period.

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Issues: Whether the assessee could be denied small scale exemption on the ground that it had not obtained a Central Excise licence, when the remand was confined to determining whether the exemption under Notification No. 175/86 had already been availed during the relevant earlier period and the earlier adjudication had not disturbed that availment.

Analysis: The remand order limited the inquiry to whether the assessee had in fact availed the benefit of Notification No. 175/86 and, if so, whether the benefit was available for the impugned period. The record showed that the assessee had been availing exemption from the beginning, and an earlier adjudication had imposed only a small penalty without raising any duty demand or unsettling the exemption already availed. That earlier order had attained finality. In the remand proceedings, the lower authority nevertheless denied the exemption on a new ground, namely absence of a Central Excise licence. Such a finding travelled beyond both the show cause notices and the remand directions, and it amounted to reopening a settled factual position in subsequent duty proceedings.

Conclusion: The denial of exemption on the ground of absence of Central Excise licence was unsustainable, and the assessee was entitled to the benefit of the exemption for the relevant period.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with consequential relief to follow.

Ratio Decidendi: A finding that goes beyond the scope of the show cause notice and a limited remand order, and that seeks to unsettle a final earlier adjudication on availed exemption, cannot sustain denial of an exemption in subsequent duty proceedings.

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