Show cause notice limits demand confirmation: adjudication cannot rest on unpleaded grounds or additional reasoning.
A demand for excise duty on Erythromycin powder was challenged on the ground that the adjudicating authority relied on reasons and material beyond the show cause notice. The notice alleged manufacture and clearance without duty and a specific classification, but the authority confirmed demand by treating the product as an antibiotic rather than an animal feed supplement. The appellate authority held that adjudication must stay within the case pleaded in the notice and cannot be expanded by unpleaded grounds. As the additional basis was not properly set out in the notice, the demand and penalty could not be sustained, and the order dropping the demand was maintained.
Issues: Whether the demand and penalty could be sustained when the adjudicating authority relied on grounds and material going beyond the show cause notice.
Analysis: The notice was issued on the stated basis that the assessee had manufactured and cleared Erythromycin powder without payment of duty and that it was correctly classifiable under Chapter Sub-heading 2941.50. The adjudicating authority, while confirming the demand, relied upon additional material and reasoning to conclude that the product was an antibiotic and not an animal feed supplement. The appellate authority found that the notice did not set out those additional grounds, and that the authority below could not travel beyond the case made out in the notice. The record also showed that the department's allegation that the product was not what it was represented to be was not supported in the manner required to sustain the demand on a basis not pleaded in the notice.
Conclusion: The demand and penalty could not be sustained on grounds beyond the show cause notice, and the assessee succeeded.
Final Conclusion: The appeal failed and the order dropping the demand was maintained.
Ratio Decidendi: A demand cannot be confirmed on grounds not contained in the show cause notice, and adjudication must remain confined to the case pleaded therein.
TaxTMI 
AI Drafter ✕
TaxTMI 
