Penalty cannot rest on a new statutory basis introduced only at appeal stage; fresh penal ground was rejected.

Penalty proceedings cannot be expanded at the appellate stage by introducing a new statutory basis that was not invoked in the show cause notice or the adjudication order. Here, the notice and original order proceeded only under Rule 15 of the Cenvat Credit Rules, 2004, while the appellate authority relied for the first time on Rule 6(b)(ii), which operates in a different field. Because the new penal basis was substituted to the prejudice of the assessee, the penalty under Rule 6(b)(ii) was held unsustainable and was set aside.

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Issues: Whether penalty could be sustained by invoking Rule 6(b)(ii) for the first time in appeal when the show cause notice and adjudication order had proceeded only under Rule 15.

Analysis: The notice and the adjudication order had proposed and imposed penalty under Rule 15 of the Cenvat Credit Rules, 2004. Rule 15 and Rule 6(b)(ii) operate in different fields, and the latter was introduced only in the appellate order. The appellate authority could not enlarge the scope of the proceedings and substitute a fresh penal basis to the prejudice of the appellant.

Conclusion: The penalty imposed under Rule 6(b)(ii) was not justified and was set aside in favour of the assessee.

Ratio Decidendi: The scope of penalty proceedings cannot be expanded at the appellate stage by introducing a new statutory basis not invoked in the show cause notice or adjudication order.

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