Modvat credit denial cannot rest on a ground beyond the show cause notice; procedural declaration defects were insufficient.

Modvat credit could not be denied on a ground different from the one set out in the show cause notice. The notice alleged wrongful availment of credit and recovery on that basis, but the adjudicating authorities instead relied on defects in the Rule 57G declaration, namely that the finished products were not mentioned or were withdrawn from it. A procedural declaration does not determine the substantive admissibility of credit, and adjudication must remain confined to the case pleaded in the notice. The Tribunal was therefore justified in interfering with the orders, and the Revenue's appeal failed.

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Issues: Whether the denial and reversal of Modvat credit could be sustained when the adjudicating authorities proceeded on a ground different from the one stated in the show cause notice.

Analysis: The notice alleged wrongful availment of credit and sought recovery on that basis. The subsequent orders, however, proceeded on the footing that the declaration filed under Rule 57G did not mention the relevant finished products, or that they were withdrawn from the declaration. The basis of adjudication thus shifted from inadmissible credit as alleged in the notice to a defect in the declaration. A declaration filed to comply with a procedural requirement does not determine the substantive admissibility of credit. Since the authorities travelled beyond the notice, the Tribunal was justified in interfering with the concurrent orders.

Conclusion: The question was answered against the Revenue and in favour of the assessee.

Final Conclusion: The Tribunal's order was upheld, and the Revenue's appeal failed.

Ratio Decidendi: Adjudication must remain confined to the case set out in the show cause notice, and a procedural defect in declaration cannot be used to sustain denial of credit on a different footing.

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