Show cause notice limits and extended limitation fail where adjudication relies on an unalleged ground.

A demand cannot be sustained where adjudication proceeds on a ground not alleged in the show cause notice. The impugned order disallowed credit by relying on the assessee's SSI exemption under Notification No. 1/93-CE, but that basis was absent from the notice, which concerned only transitional Modvat credit. Since the relevant declarations under Rule 57G and Rule 57H had been filed and the Department already knew of the exemption from returns, the adjudication could not travel beyond the notice. The factual basis for extended limitation was also missing, so the demand was unsustainable and was set aside.

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Issues: Whether the duty demand could be sustained when the adjudication proceeded on a ground not alleged in the show cause notice and when invocation of the extended period of limitation was unsupported.

Analysis: The impugned order disallowed credit on the basis that the assessee had availed SSI exemption under Notification No. 1/93-CE, but that ground was not part of the show cause notice. The Department had knowledge of the exemption through the filed returns, and the adjudication could not lawfully travel beyond the scope of the notice. The only allegation in the notice concerned transitional Modvat credit, and the record showed that the relevant declarations under Rule 57G and Rule 57H had been filed. In these circumstances, the foundation for invoking the extended period of limitation also failed.

Conclusion: The demand was unsustainable and was set aside. The appeal succeeded.

Ratio Decidendi: A demand cannot be sustained on a ground not alleged in the show cause notice, and the extended period of limitation cannot be invoked when its factual basis is absent from the notice and the relevant facts were already within the Department's knowledge.

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