Fair notice in duty proceedings requires disclosure of relied-upon material and no new grounds beyond the show cause notice.

Duty and penalty proceedings cannot stand where the show cause notice relies on literature or other material that was not supplied for inspection, because the assessee is denied a fair opportunity to ? No, avoid non-English. The assessee is denied a fair opportunity to answer the case. They also cannot be sustained when the adjudication order introduces new grounds, such as product features or third-party classifications, that were not set out in the notice. The operative rule is that the notice must disclose the material basis of the allegation and the decision must remain confined to the stated grounds. On both counts, the demand and penalty were set aside.

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Issues: (i) Whether the demand and penalty could be sustained when the literature relied upon in the show cause notice was not made available for inspection; (ii) Whether the demand and penalty could be upheld when the order relied on grounds not set out in the show cause notice.

Issue (i): Whether the demand and penalty could be sustained when the literature relied upon in the show cause notice was not made available for inspection.

Analysis: The show cause notice was founded on literature said to have been circulated by the appellants, but the record showed that only certain departmental records were made available for inspection. There was no material to show that the literature forming the basis of the notice and the adjudication order was supplied or shown to the appellants. A notice based on undisclosed material denies a fair opportunity to meet the case.

Conclusion: The demand and penalty could not be sustained on this ground and were liable to be set aside in favour of the assessee.

Issue (ii): Whether the demand and penalty could be upheld when the order relied on grounds not set out in the show cause notice.

Analysis: The adjudication order relied on matters such as the use of moped tyres, the function of pedals as a starter, the shape of the vehicle, and classifications of other manufacturers. These matters were not part of the show cause notice, which referred only to the circulated literature. An order cannot be supported by new and extraneous grounds not put to notice, because the assessee must know the exact case to be answered.

Conclusion: The demand and penalty were unsustainable because the order proceeded on grounds outside the show cause notice, in favour of the assessee.

Final Conclusion: The appellate order was set aside and the demand of duty together with the penalty was annulled because the proceedings offended fair notice requirements.

Ratio Decidendi: An adjudication imposing duty or penalty cannot stand unless the show cause notice supplies the material basis of the allegation and the decision is confined to the grounds stated in that notice.

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