Excise adjudication cannot go beyond the show cause notice or rely on speculative turnover estimates for duty liability.

Excise adjudication cannot sustain duty demand or penalty on grounds not set out in the show cause notice, including clubbing clearances of other units when the notice alleged manufacture only by the appellant. Denial of small-scale exemption and confirmation of duty also cannot rest on unsupported turnover assumptions, such as treating non-production of records as proof of excess clearances or extrapolating part-year figures without reliable material. The text states that liability and exemption claims must be determined within the notice's scope and on credible evidence, not speculative estimation.

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Issues: (i) Whether the adjudication order could sustain a demand and penalty on a basis different from, and beyond the scope of, the show cause notice by clubbing the clearances of other units. (ii) Whether denial of small-scale exemption and determination of duty liability on the basis of assumed turnover figures was sustainable.

Issue (i): Whether the adjudication order could sustain a demand and penalty on a basis different from, and beyond the scope of, the show cause notice by clubbing the clearances of other units.

Analysis: The notice proposed duty demand only on the allegation of manufacture by the appellant. It did not propose clubbing of clearances of other units or fastening liability on a different manufacturer. The adjudication order, however, proceeded on the footing that the clearances were made by another manufacturer and that the clearances of multiple units were to be clubbed. Such a finding travelled beyond the allegations in the notice and could not validly sustain the demand or penalty against the appellant.

Conclusion: The finding was unsustainable and was against the Revenue.

Issue (ii): Whether denial of small-scale exemption and determination of duty liability on the basis of assumed turnover figures was sustainable.

Analysis: The turnover for the relevant years was not established by reliable material. The figures were fixed by assumption, including by treating non-production of records as proof of turnover in excess of the exemption threshold and by extrapolating the first quarter figures for the full year. Such estimation, in the absence of supporting material, was not a permissible basis for confirming duty and penalties or for denying the exemption claim.

Conclusion: The denial of exemption and the resulting demand were unsustainable and were against the Revenue.

Final Conclusion: The impugned order could not stand either on law or on facts and was set aside in full with consequential relief to the appellant.

Ratio Decidendi: An adjudication order in excise proceedings cannot travel beyond the scope of the show cause notice, and duty liability or denial of exemption cannot be founded on unsupported assumptions or speculative estimations of turnover.

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