Show cause notice limits adjudication: duty demand and penalties fail when liability is confirmed on an unalleged ground.

Duty demand and penalties cannot be sustained when an adjudicating authority confirms liability on a ground not alleged in the show cause notice. The notice here alleged only failure to satisfy the exemption condition that manufacture should commence from the pulp stage in the factory, but the order accepted that contention and instead confirmed demand for lack of proof that the pulp contained at least 75% by weight of pulp made from specified materials. Confirming demand on an unnotified basis deprived the assessee of an opportunity to answer the allegation and amounted to travelling beyond the scope of the notice. The impugned order was therefore liable to be set aside.

---

---

Issues: Whether the demand of duty and consequential penalties could be sustained when the adjudicating authority confirmed the demand on a ground not alleged in the show cause notice.

Analysis: The show cause notice alleged only non-fulfilment of the first condition in the exemption notifications, namely that manufacture should start from the stage of pulp in the factory. The impugned order, however, accepted the appellant's contention on that aspect and nevertheless confirmed the demand on a different basis, namely absence of proof that the pulp contained not less than 75% by weight of pulp made from specified materials. The demand was thus sustained on a case not put to the appellant in the notice. Such a course deprived the appellant of an opportunity to meet the new allegation and amounted to travelling beyond the scope of the show cause notice.

Conclusion: The demand and penalties could not be sustained and the impugned order was liable to be set aside.

---