Natural justice requires a penalty order to stay within the show cause notice's stated ground.

A penalty order under the Andhra Pradesh General Sales Tax Act was invalid because it was based on a ground not disclosed in the show cause notice. The notice alleged violation of section 5B(2)(ii), but the order relied on a different basis, namely that use of light diesel oil in manufacture amounted to a deemed sale. A quasi-judicial authority cannot travel beyond the case set out in the notice, as the affected party must have a fair opportunity to meet the precise adverse ground. The penalty was therefore unsustainable and was set aside for breach of natural justice.

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Issues: Whether the penalty order could be sustained when it proceeded on a ground not disclosed in the show cause notice, thereby depriving the petitioner of an opportunity to meet that ground.

Analysis: The notice proposed penalty on the basis of alleged violation of section 5B(2)(ii) of the Andhra Pradesh General Sales Tax Act, 1957, but the impugned order rested on a different footing, namely that the use of light diesel oil in manufacture amounted to a deemed sale of oil. A quasi-judicial order cannot travel beyond the case set out in the notice, because the affected party must be put on notice of the precise basis on which adverse action is proposed. Since the petitioner was not informed of the actual ground adopted in the order, the decision was rendered without compliance with the requirement of fair hearing.

Conclusion: The penalty order was unsustainable and was rightly set aside for violation of the principles of natural justice.

Ratio Decidendi: An adverse tax order cannot be sustained if it is founded on a ground not contained in the show cause notice and not put to the affected party for explanation.

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