Show cause notice scope and limitation in excise demand: adjudication cannot expand the charge or rely on unproven suppression.

Excise adjudication cannot go beyond the show cause notice: where duty was proposed on sub-assemblies, the authority could not convert the matter into a fresh demand on basic parts without proper notice and opportunity. The document also notes that the extended limitation period was not justified because the department had knowledge of the manufacturing activity and relevant disclosures, so suppression was not established. Independently, the record did not show that the sub-assemblies were marketable goods liable to duty. On that footing, the demand and penalty did not survive.

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Issues: (i) whether the adjudicating authority could travel beyond the show cause notice and convert a demand on sub-assemblies into a demand on basic parts, and (ii) whether the demand was barred by limitation and whether the goods were shown to be marketable and excisable.

Issue (i): whether the adjudicating authority could travel beyond the show cause notice and convert a demand on sub-assemblies into a demand on basic parts

Analysis: The notice proceeded on the footing that duty was sought on the three sub-assemblies described in the annexures. The department was aware of the existence of basic parts, but those were not the subject of the demand. The final order nevertheless directed the assessee to furnish lists of basic parts, declare assessable values, and enabled fresh quantification on that basis. A final adjudication cannot alter the foundation of the notice or effectively issue a fresh notice without affording proper opportunity on the new basis.

Conclusion: The adjudicating authority acted beyond the scope of the show cause notice, and the order was unsustainable on that ground.

Issue (ii): whether the demand was barred by limitation and whether the goods were shown to be marketable and excisable

Analysis: The record showed repeated correspondence, classification filings, and disclosure of the manufacturing process, negativing suppression. The department had knowledge of the manufacturing activity and the nature of the sub-assemblies. Independently, the record also did not establish that the sub-assemblies were marketable goods liable to duty. In those circumstances, invocation of the larger period was not justified and the demand could not survive on merits.

Conclusion: The demand was held to be time-barred, and the goods were not established as dutiable marketable goods.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with the demand and penalty not surviving.

Ratio Decidendi: An adjudication under excise law cannot go beyond the scope of the show cause notice, and the extended period cannot be invoked in the absence of suppression when the department already has knowledge of the relevant facts.

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