Show cause notice controls excise demand: credit cannot be denied on a final-product theory not alleged in the notice.

A show cause notice that treated Lean Gas as a by-product could not later be used to deny Modvat credit on the contrary footing that it was a final product. The Court held that excise demand and related denial of relief must stand or fall on the contents of the notice itself, and the Department cannot expand the basis of the case at the adjudication stage. The broader question whether Lean Gas was legally a by-product or a final product was left open, because the notice did not allege the latter position. The decision reaffirmed that the show cause notice is the foundation of excise proceedings.

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Issues: Whether the appeals could succeed when the show cause notice proceeded on the basis that Lean Gas was a by-product and not a final product, and whether the Department could deny Modvat credit on that footing.

Analysis: The demand was founded on a show cause notice which itself treated Lean Gas as a by-product arising from the manufacture of LPG from natural gas. The Court held that the Department could not, on that notice, deny the assessee the benefit of Modvat credit under Rule 57D by contending that Lean Gas was a final product. The larger controversy whether Lean Gas was in law a by-product or a final product was left unanswered because the case had to be decided on the contents of the notice itself. The Court reaffirmed that the show cause notice is the foundation of the demand in excise proceedings.

Conclusion: The appeals failed because the show cause notice did not allege that Lean Gas was a final product, and the assessee could not be denied relief on that basis.

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