Procedural fairness bars MODVAT recovery on a new rule basis when the notice named a different provision.

A demand for reversal of MODVAT credit cannot be sustained on a statutory basis materially different from the one stated in the show-cause notice unless the assessee is put to notice and given a fair opportunity to respond. A mere wrong citation may not invalidate proceedings, but where the authority shifts from Rule 57U to Rule 57AH, and that shift affects limitation and liability, procedural fairness requires prior notice of the altered basis. The article emphasises that recovery cannot be enlarged by changing the legal footing midstream without hearing the assessee.

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Issues: Whether the demand for reversal of MODVAT credit could be sustained by applying Rule 57AH of the Central Excise Rules, 1944 when the show-cause notice had been issued only under Rule 57U, and whether such a course was permissible without prior notice and opportunity to the assessee.

Analysis: The show-cause notice proceeded entirely on the footing of Rule 57U. The proceedings before the adjudicating authority and the remand proceedings also moved on the same basis. The adjudicating authority, however, after noting that Rule 57U had already been omitted and that Rule 57AH governed recovery of wrongly availed credit, shifted the case to Rule 57AH and applied its longer limitation period, thereby enhancing the assessee's liability. That change was made without informing the assessee that the matter would be examined under a different rule, and without giving an opportunity to meet the new basis of demand. A mere wrong citation may not by itself invalidate proceedings, but a shift from the rule invoked in the notice to a different rule with materially different consequences, without notice or hearing, offends procedural fairness.

Conclusion: The demand could not be sustained on the basis of Rule 57AH when the notice had been issued under Rule 57U and no opportunity was given to the assessee to meet the altered basis; the impugned order was liable to be set aside.

Final Conclusion: The assessee succeeded and the adjudication order based on the new rule was annulled with consequential relief.

Ratio Decidendi: A demand cannot be sustained on a statutory basis materially different from the one invoked in the show-cause notice unless the assessee is put to notice and given a fair opportunity to meet that basis.

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