Cess demand cannot rest on a new ground outside the show cause notice and remand directions

A cess demand could not be sustained when the adjudicating authority confirmed it on a ground not stated in the show cause notices and outside the remand directions. The notices alleged only that the tractors fell within the scheduled industry of agriculture machinery under the Industries (Development and Regulation) Act, 1951, and the remand was limited to that question. The authority instead relied on a different notification and treated the tractors as covered by the scheduled industry of transportation. As that basis was neither pleaded in the notices nor authorised by the remand, the cess demand was set aside and the order was upheld in favour of the respondents.

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Issues: Whether the demand of cess could be sustained on a ground different from the one stated in the show cause notices and outside the scope of the remand directions, after the authority found that the tractors were not covered by the scheduled industry of agriculture machinery.

Analysis: The show cause notices proposed recovery of cess only on the footing that the tractors manufactured by the respondents fell within the scheduled industry of agriculture machinery under Section 9(1) of the Industries (Development and Regulation) Act, 1951 read with Ministry of Industries Order No. 662(E) dated 9-9-1985. The earlier remand order also confined the fresh adjudication to enquiring whether the goods fell in the category of agriculture machinery. The adjudicating authority, however, confirmed the demand on a new basis by relying on Notification No. S.O. 247(E) dated 22-3-1990 and treating the tractors as covered by the scheduled industry of transportation. That basis was neither part of the show cause notices nor within the remand directions.

Conclusion: The demand could not be sustained on a new ground beyond the show cause notices and the remand order, and the order setting aside the cess demand was ly upheld in favour of the respondents.

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