Show-cause notice limits demand confirmation: a tax demand cannot be upheld on a ground not alleged to the assessee.

A tax demand cannot be sustained on a ground that was not alleged in the show-cause notice. The notice proposed duty on furnace oil sludge on the basis of an alleged violation of Notification No. 53/97 relating to waste and scrap, but the appellate authority rejected that basis and confirmed the demand on a different ground, namely that the sludge was imported goods not put to use and therefore not exempt. Because this new basis travelled beyond the notice, the confirmation was impermissible. The order-in-appeal was set aside and the assessee's appeal succeeded.

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Issues: Whether the demand of duty on furnace oil sludge could be sustained when the appellate authority confirmed it on a ground not proposed in the show-cause notice, and whether the authority could travel beyond the notice.

Analysis: The demand had been proposed on the basis of alleged violation of paragraph 7 of Notification No. 53/97 in relation to waste and scrap arising from imported furnace oil. The appellate authority, however, rejected that specific basis and upheld the demand on a different footing, namely that the sludge represented imported goods that had not been put to use and therefore did not qualify for exemption. Such a basis was not part of the show-cause notice. A demand or confirmation cannot be sustained on a new ground that was never alleged to the assessee in the notice.

Conclusion: The confirmation of demand on a ground beyond the show-cause notice was impermissible and could not be sustained.

Final Conclusion: The order-in-appeal was set aside and the assessee's appeal succeeded.

Ratio Decidendi: An adjudicating or appellate authority cannot sustain a tax demand on a ground that travels beyond the allegations and basis set out in the show-cause notice.

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