Deemed credit on scrap was allowed only until withdrawal of the concession; new grounds not in notice could not be used.

Deemed credit on iron and steel scrap bought from the open market was available only while the notified concession remained in force, so it was admissible up to 28.8.1986 and not on or after 29.8.1986, when the concession was withdrawn. An adverse finding that the inputs were clearly recognisable as non-duty paid could not stand because that ground was not stated in the show cause notice, and a party must be given fair notice of the case it has to meet. The penalty was maintained because the credit had been taken under the notified concession scheme.

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Issues: (i) Whether deemed credit on iron and steel scrap purchased from the open market was admissible up to 28.8.1986 and inadmissible thereafter after withdrawal of the concession. (ii) Whether the finding that the inputs were clearly recognisable as non-duty paid could be sustained when that ground was not set out in the show cause notice, and whether penalty was justified.

Issue (i): Whether deemed credit on iron and steel scrap purchased from the open market was admissible up to 28.8.1986 and inadmissible thereafter after withdrawal of the concession.

Analysis: The concession for deemed credit was granted under the special scheme for inputs where duty paying documents were not available, and the Government's subsequent withdrawal took effect only from 29.8.1986. Scrap purchased from the open market was treated as duty paid in the absence of evidence to the contrary, and the benefit of the earlier concession could be availed only until the date of withdrawal.

Conclusion: Deemed credit was admissible up to 28.8.1986, but not on or after 29.8.1986.

Issue (ii): Whether the finding that the inputs were clearly recognisable as non-duty paid could be sustained when that ground was not set out in the show cause notice, and whether penalty was justified.

Analysis: A new adverse ground not alleged in the show cause notice could not be introduced in the adjudication order, and the assessee was entitled to a fair opportunity to meet the case against it. The record also showed that the credit was taken under the notified concession scheme, so the penalty was not required to be disturbed.

Conclusion: The adverse finding on recognisability as non-duty paid could not be sustained, but the penalty was maintained.

Final Conclusion: The appeal succeeded only to the extent of protecting deemed credit for the period before withdrawal of the concession, while the demand for reversal after withdrawal and the penalty remained undisturbed.

Ratio Decidendi: A concession for deemed credit under a notified scheme operates only for the period for which it remains in force, and an adjudicating authority cannot sustain an adverse finding on a ground not put to notice in the show cause notice.

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