Binding classification and notice discipline in tax assessment: prior final tribunal view and notice limits barred a contrary reassessment.

A tax authority could not depart from an earlier final tribunal classification treating the product as exempt "Sev" and reclassify it under the residuary entry when there was no material change in facts or law; the prior decision had attained finality and remained binding in the same assessee's case. The assessment was also unsustainable because the show cause notice proposed classification as "Farsan and eatables," but the final order shifted to the residuary entry and imposed a higher rate without notice. The assessment orders were quashed, subject to the revenue's liberty to pursue lawful remedial action.

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Issues: (i) Whether the assessing authority could depart from the earlier final tribunal decision classifying the product as exempt "Sev" and assess it under the residuary entry in the absence of any material change in facts or law. (ii) Whether the impugned assessment could be sustained when it went beyond the scope of the show cause notice that proceeded on a different proposed classification.

Issue (i): Whether the assessing authority could depart from the earlier final tribunal decision classifying the product as exempt "Sev" and assess it under the residuary entry in the absence of any material change in facts or law.

Analysis: The earlier tribunal decision in the petitioner's own case had attained finality and had consistently been followed for years. The relevant exemption entries under the earlier sales tax regime and the VAT regime were materially the same, and no change in the statutory wording or in the factual foundation was shown. In such circumstances, a subordinate quasi-judicial authority could not ignore the binding effect of the earlier decision and take a contrary view merely because a different view was thought to be preferable. The rule against rigid res judicata in tax matters did not assist the revenue where the same classification issue had already been finally decided and consistently accepted.

Conclusion: The reassessment under the residuary entry was unsustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether the impugned assessment could be sustained when it went beyond the scope of the show cause notice that proceeded on a different proposed classification.

Analysis: The show cause notice proposed to treat the product as "Farsan and eatables" and to levy tax at the rate applicable to that entry. The final order, however, shifted the product to the residuary entry and imposed a higher rate of tax. An adjudicating authority cannot travel beyond the foundation laid in the notice and impose liability on a basis for which the assessee was not put to notice and given an opportunity to respond.

Conclusion: The assessment order was invalid on this ground as well and the issue was decided in favour of the assessee.

Final Conclusion: The impugned assessment orders were quashed, with liberty to the revenue to pursue lawful remedial measures, and the petitions were allowed to that extent.

Ratio Decidendi: Where a classification issue has been finally decided by a competent higher forum and has been consistently accepted, a subordinate tax authority cannot depart from that view in a later year absent a material change in facts or law, and an assessment cannot be sustained if it adjudicates on a basis not disclosed in the show cause notice.

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