Excise duty on scrap cannot be sustained on a ground outside the show cause notice; shifted liability fails.

Excise duty on waste and scrap cannot be sustained when the liability is confirmed on a basis different from the show cause notice, because such a shift violates natural justice and travels beyond the pleaded case. The notice alleged wrongful availment of CENVAT/Modvat credit on machinery and clearance of scrap without duty, but the lower authorities upheld demand instead on the theory that the scrap arose from mechanical working of metal under Chapter Heading 7204. The text states that this credit allegation was not established, and that scrap generated from repair, maintenance, or dismantling of old machinery could not be taxed on the new basis. The demand was therefore set aside.

---

---

Issues: Whether the demand of duty on waste and scrap was sustainable when the adjudicating authorities confirmed it on a ground different from the show cause notice and when the scrap arose from repair, maintenance, and dismantling of capital goods.

Analysis: The show cause notice proceeded on the allegation that CENVAT/Modvat credit had been availed on the machinery and that scrap generated from such goods had been cleared without payment of duty. However, the demand was confirmed by the lower authorities on a different basis, namely that the scrap arose from mechanical working of metal and was classifiable under Chapter Heading 7204. The credit allegation was ultimately found not established, yet the demand was still sustained on a new foundation not set out in the notice. The scrap was also stated to have arisen during repair and maintenance of plant and machinery and from dismantling old and used machinery. Duty could not be fastened on that shifted basis, as it amounted to travelling beyond the show cause notice and offended natural justice.

Conclusion: The demand was not sustainable and the appeal was allowed.

Final Conclusion: The order confirming duty on the scrap was set aside because the liability was upheld on a ground not contained in the show cause notice, and the appellant obtained full relief.

Ratio Decidendi: A demand of excise duty cannot be sustained on a ground different from the one proposed in the show cause notice, and scrap arising from repair, maintenance, or dismantling of used machinery is not liable to duty on that shifted basis.

---