Show cause notice limits appellate reasoning: a refund rejection based on a new ground was set aside and remanded.

An appellate authority cannot sustain rejection of a refund claim on a ground not set out in the show cause notice, and it must address the assessee's challenge to the circular that formed the basis of the demand. Where the Commissioner (Appeals) ignored the core objection and rejected the matter on a different basis, namely that the remission order itself was not challenged, the order travelled beyond the notice and could not stand. The appellate order was therefore set aside and the matter remanded for fresh consideration after hearing the assessee.

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Issues: Whether the appellate authority could sustain rejection of the refund claim on a ground not raised in the show cause notice and without dealing with the assessee's challenge to the circular on which the demand was founded.

Analysis: The show cause notice and the adjudication order proceeded on the basis of the departmental circular. In the appellate order, however, the Commissioner (Appeals) did not examine that basis and instead rejected the appeal on a different ground, namely that the order of remission itself had not been challenged. The accepted legal position is that an authority cannot make out a new case beyond the notice and must decide the controversy on the grounds actually put to the noticee. As the appellate authority failed to address the core contention and travelled beyond the show cause notice, the order could not be sustained.

Conclusion: The appellate order was set aside and the matter was remanded to the Commissioner (Appeals) for fresh consideration after hearing the appellant.

Ratio Decidendi: An adjudicatory or appellate authority cannot reject a claim on a ground not forming part of the show cause notice, and any order passed in disregard of the issues actually raised is liable to be set aside and remanded.

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