Show cause notice limits adjudication; demand and penalty fail when confirmed on grounds not alleged.

A duty demand cannot be sustained where the sole ground in the show cause notice fails and the adjudicating authority then confirms liability on a different basis not alleged in the notice. The notice is the foundation of adjudication, so the authority must confine itself to the stated allegations and cannot travel beyond them. Applying that principle, the demand and penalty were held unsustainable, and the impugned order was set aside with the appeals allowed.

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Issues: Whether the demand and penalty could be sustained when the sole ground in the show cause notice was not upheld and the adjudicating authority proceeded on grounds not alleged in the notice.

Analysis: The only basis stated in the show cause notice for revising the assessable value was the alleged adoption of the price declared in the delivery notes as the value of the grey fabrics. The order recorded that this ground was not sustained. After rejecting that basis, the authority nevertheless confirmed the demand on a different footing not set out in the notice. The settled principle applied is that the show cause notice is the foundation of the levy and recovery proceedings, and the adjudicating authority cannot travel beyond the allegations and grounds contained in it.

Conclusion: The demand and the penalty could not be sustained.

Final Conclusion: The impugned order was set aside and the appeals were allowed.

Ratio Decidendi: A duty demand cannot be confirmed on grounds not alleged in the show cause notice, because the notice defines the scope of adjudication and the authority cannot go beyond it.

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