Show cause notice limits and consignee liability barred fresh excise demand against the supplier under the exemption procedure.

A duty demand cannot be sustained on grounds not set out in the show cause notice; the authority had relied on alleged misuse of exemption and consumption patterns that were not part of the notice, so the demand failed on that basis. Where goods were cleared under CT-2 certificates within the exemption procedure and the liability under the scheme lay on the consignee, duty could not be recovered again from the supplier once the consignee had already been proceeded against. The order was therefore set aside and the assessee succeeded.

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Issues: (i) whether the adjudicating authority could confirm duty by travelling beyond the allegations in the show cause notice; (ii) whether duty, if any, was recoverable from the appellant when the goods were cleared under CT-2 certificates and the exemption procedure placed liability on the consignee.

Issue (i): Whether the adjudicating authority could confirm duty by travelling beyond the allegations in the show cause notice.

Analysis: The show cause notice proceeded on the specific basis that the earlier exemption notification had been rescinded and, therefore, the CT-2 certificate had become invalid. The adjudicating authority, while confirming demand, relied on alleged misuse of exemption by the consignee and issues arising from its procurement and consumption pattern, which were not the foundation of the notice. A demand cannot be sustained on a case different from the one set out in the notice.

Conclusion: The finding was in favour of the assessee and the demand could not be sustained on grounds beyond the show cause notice.

Issue (ii): Whether duty, if any, was recoverable from the appellant when the goods were cleared under CT-2 certificates and the exemption procedure placed liability on the consignee.

Analysis: The clearances were made under CT-2 certificates issued in connection with the exemption regime under Notification No. 5/98-C.E. and the continuing notification framework. Under Chapter X of the Central Excise Rules, 1944, the benefit was availed by the procurer subject to compliance with the prescribed procedure, and any short levy or wrong availment fell on the consignee. Since the consignee had already been proceeded against, the same duty could not again be demanded from the appellant.

Conclusion: The finding was in favour of the assessee and the appellant was not liable to discharge the duty demand.

Final Conclusion: The impugned order was set aside and the appeal succeeded because the demand was unsustainable both for travelling beyond the notice and for fastening liability on the appellant instead of the consignee.

Ratio Decidendi: A duty demand cannot be confirmed on grounds not alleged in the show cause notice, and where the exemption procedure casts liability on the consignee, the same duty cannot be recovered again from the supplier.

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