Scope of show cause notice limits appellate power to impose unproposed penalties and require fresh notice

An appellate authority cannot travel beyond the scope of the original show cause notice or require a fresh notice for penalties that were never proposed in the proceedings. Here, the tribunal had already held that penalty under Sections 11AB and 11AC of the Central Excise Act could not be invoked for delayed payment under Rule 6 of the Cenvat Credit Rules, 2001. In that setting, there was no legal basis to direct issuance of a subsequent show cause notice for penalties under Rule 57AH, Rule 173Q, and Rules 12 and 13 when those penalties were absent from the original notice. The direction for a fresh notice was set aside.

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Issues: Whether the appellate authority could direct issuance of a fresh show cause notice for imposition of penalty where such penalty had not been proposed in the original notice and the authority had travelled beyond the scope of the proceedings.

Analysis: The Revenue appeal was dismissed on account of the low tax effect and the applicable monetary-limit instructions. On the assessee's appeal, the order under challenge had already held that penalty under Section 11AB and Section 11AC of the Central Excise Act, 1944 could not be invoked for delayed payment under Rule 6 of the Cenvat Credit Rules, 2001. Once that finding was recorded, there was no basis for the appellate authority to direct issuance of a fresh show cause notice for penalty under Rule 57AH and Rule 173Q of the Central Excise Rules, 1944 and Rule 12 and Rule 13 of the Cenvat Credit Rules, 2001 when those penalties had not been proposed in the original proceedings.

Conclusion: The direction to issue a subsequent show cause notice was not in accordance with law and was set aside; the assessee's appeal succeeded.

Ratio Decidendi: An appellate authority cannot go beyond the proposals in the original show cause notice or require a fresh notice for penalties not originally proposed.

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