Show cause notice limits: tribunal cannot uphold a demand on a basis never put to the assessee.

A tribunal cannot sustain or create a demand on a basis not set out in the show cause notice. Here, the notice alleged only wrongful utilisation of MODVAT credit on exempted PVC film, but the Tribunal shifted to a different factual and legal premise concerning excess credit and the manufacturing process. The HC held that such an expansion was impermissible and beyond jurisdiction, so the Tribunal could not mould relief into a new case not pleaded in the notice. The Court also noted that the notification restriction did not apply where duty-paid input under Heading 39.20 was used to manufacture goods under Heading 59.03. The impugned direction was therefore set aside.

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Issues: Whether the Tribunal could sustain a demand by travelling beyond the grounds set out in the show cause notice and by proceeding on a basis not proposed to the assessee.

Analysis: The notice proceeded only on the footing that MODVAT credit on exempted PVC film was wrongly utilized. No notice was issued on the distinct basis that the assessee had claimed credit in excess of what was permissible. The Tribunal, however, shifted to a different factual and legal premise regarding the manner in which coated fabric was manufactured and the applicability of the notification restriction. The Court held that such a course was not permissible, since a tribunal cannot mould relief into a new demand not made in the notice. The restriction in the notification was also held to be inapplicable where the duty paid input fell under Heading 39.20 and was used for manufacture of goods under Heading 59.03.

Conclusion: The Tribunal's direction was set aside for having gone beyond the show cause notice and for acting without jurisdiction; the petition succeeded.

Final Conclusion: Adjudicatory relief cannot be founded on a case materially different from the one put to notice, and the impugned direction was invalid to the extent it rested on such an expansion.

Ratio Decidendi: A tribunal cannot, under the guise of moulding relief, uphold or create a demand on a basis never alleged in the show cause notice.

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