Estimation beyond the show cause notice cannot sustain a duty demand when liability is reworked on a new basis.

A duty demand and penalty based on alleged suppressed production could not be sustained when the adjudicating authority discarded the estimation method stated in the show cause notice and applied a new formula based on raw material consumption. The assessee had not been put to notice that this alternative basis would be used, so the revised computation introduced a fresh foundation beyond the scope of the notice. Even where material suggested clandestine clearances, the adjudication could not travel outside the notice in quantifying liability. The demand and penalty were therefore set aside in favour of the assessee.

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Issues: Whether the demand and penalty could be sustained when the adjudicating authority changed the basis of estimating production and clearances from the method proposed in the show cause notice without putting the assessee to notice.

Analysis: The notice quantified alleged suppressed production on the basis of electricity consumption per unit of production. In the adjudication order, that method was discarded and a different basis, namely raw material consumption, was adopted to rework production and duty liability. The assessee had no notice that such a different estimation formula would be applied, and the revised computation therefore introduced a new foundation for the demand beyond the scope of the notice. Even though there was some material suggesting clandestine clearances, the demand could not be sustained when the adjudication travelled beyond the notice in the manner of estimation.

Conclusion: The demand and penalty were unsustainable and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded because the impugned order was set aside for adopting a basis of estimation not proposed in the notice.

Ratio Decidendi: An adjudication cannot sustain a duty demand by substituting a new method of quantification that was not disclosed in the show cause notice, since the demand then travels beyond the notice.

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