Show cause notice limits and exemption conditions under Notification No. 121/94 controlled the dispute over chewing tobacco clearances.
A duty demand or denial of exemption cannot be sustained on grounds not set out in the show cause notice, and an appellate authority cannot uphold the case on a new basis without fresh notice and opportunity to . The exemption under Notification No. 121/94, as amended, was confined to clearances for use in the factory of the same manufacturer under Chapter X procedure; clearances to another manufacturer's factory did not satisfy that condition. CT-2 certificates alone did not establish entitlement to the substantive exemption. The demand failed only to the extent it rested on new grounds, but the exemption claim failed on the notification's wording.
Issues: (i) Whether the demand could be sustained on grounds not contained in the show cause notice, and whether the appellate authority could uphold the demand on a new basis without issuing a fresh notice. (ii) Whether the appellant was entitled to the exemption under Notification No. 121/94, as amended, for chewing tobacco cleared to another manufacturer's factory under Chapter X procedure.
Issue (i): Whether the demand could be sustained on grounds not contained in the show cause notice, and whether the appellate authority could uphold the demand on a new basis without issuing a fresh notice.
Analysis: The demand had been confirmed by introducing grounds not alleged in the show cause notices, and the appellate authority also relied on a different basis not found in the notice or the original adjudication. A denial of exemption cannot be sustained on a new ground without putting the assessee to notice and giving an opportunity to meet that case.
Conclusion: The demand could not be sustained on grounds outside the show cause notice, and the contrary orders were illegal.
Issue (ii): Whether the appellant was entitled to the exemption under Notification No. 121/94, as amended, for chewing tobacco cleared to another manufacturer's factory under Chapter X procedure.
Analysis: The proviso to the notification permitted movement to a different factory of the same manufacturer subject to Chapter X procedure. On the wording used, use in the factory of a different manufacturer did not satisfy the condition. The existence of CT-2 certificates did not by itself establish entitlement to the substantive exemption.
Conclusion: The appellant was not entitled to the exemption on merits for clearances to a different manufacturer's factory.
Final Conclusion: The appeal succeeded only to the extent that the impugned order could not be supported on grounds beyond the show cause notice, while the substantive claim to exemption failed on the interpretation of the notification.
Ratio Decidendi: A duty demand or denial of exemption cannot be upheld on a ground not contained in the show cause notice, and an exemption conditioned on use in a different factory applies only within the statutory confines of the notification.
TaxTMI 
AI Drafter ✕
TaxTMI 
