Composite penalty cannot exceed show cause notice, and a demand based on a set-aside order requires fresh adjudication.

A demand, interest and penalties based on an earlier order that had already been set aside could not be sustained, because the adjudication required a fresh appraisal of the facts and material; the dispute was remanded for de novo decision after hearing the assessee. Separate penalties under Rule 15(1) and Rule 15(2) of the CENVAT Credit Rules, 2004 were also held impermissible where the show cause notice proposed only a composite penalty under Section 11AC and did not allege distinct grounds for separate penal consequences. The notice could not be expanded beyond its terms, so the additional penalty challenge failed.

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Issues: (i) Whether the demand, interest and penalties could be sustained when the adjudicating authority had relied on an earlier decision that had already been set aside, warranting fresh adjudication; (ii) Whether separate penalties under Rule 15(1) and Rule 15(2) of the CENVAT Credit Rules, 2004 were imposable when the show cause notice proposed only a composite penalty without specific allegations for distinct penalties.

Issue (i): Whether the demand, interest and penalties could be sustained when the adjudicating authority had relied on an earlier decision that had already been set aside, warranting fresh adjudication.

Analysis: The adjudicating authority had proceeded on the basis of an earlier order in the assessee's own case. That order had already been set aside, and the foundation of the impugned demand therefore could not stand. Since the matter required reconsideration on a fresh appraisal of the facts and material, the proper course was to remit the dispute to the original authority for de novo decision after granting an opportunity of hearing.

Conclusion: The impugned order on merits could not be sustained and the matter was remanded for fresh adjudication.

Issue (ii): Whether separate penalties under Rule 15(1) and Rule 15(2) of the CENVAT Credit Rules, 2004 were imposable when the show cause notice proposed only a composite penalty without specific allegations for distinct penalties.

Analysis: The show cause notice proposed penalty in composite terms under Section 11AC of the Central Excise Act, 1944 read with the CENVAT Credit Rules, 2002/2004. It did not specify separate penalties under different clauses of Rule 15, nor did it contain distinct allegations supporting such separate penal consequences. In the absence of a specific proposal and corresponding allegation, separate penalties under Rule 15 could not be imposed.

Conclusion: Separate penalties under Rule 15(1) and Rule 15(2) were not imposable.

Final Conclusion: The assessee obtained remand of the matter for fresh consideration, while the Revenue's challenge to additional penalty failed.

Ratio Decidendi: A penalty cannot be sustained or enlarged beyond the scope of the show cause notice, and where the adjudication is founded on an earlier order that has been set aside, the matter must be reconsidered afresh after granting due opportunity of hearing.

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