Show-cause notice scope and Modvat credit on plastic crates controlled the demand and relief for the assessee.

A demand cannot be sustained on a ground not set out in the show cause notice, so the adjudication could not rely on a new secondary-packing basis and the demand was set aside. Plastic crates used to transport aerated water bottles, as packaging material making the final product marketable, were treated as eligible for Modvat credit under Rule 57A for the period before 17-11-1995, with the later two-Member Bench view preferred over the earlier Single Member Bench view. Consequential relief was available to the assessee in accordance with law.

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Issues: (i) Whether the demand could be sustained on a ground of "secondary packing" when that allegation was not contained in the show cause notice; (ii) Whether Modvat credit was admissible on plastic crates used for transporting aerated water bottles prior to 17-11-1995.

Issue (i): Whether the demand could be sustained on a ground of "secondary packing" when that allegation was not contained in the show cause notice.

Analysis: The adjudicating authority accepted the appellants' contention on the notice as issued, but nevertheless confirmed the demand by introducing a new basis that the plastic crates were secondary packing. A demand cannot be upheld on an allegation not put to the noticee in the show cause notice, since adjudication must remain within the scope of the notice.

Conclusion: The confirmation of demand on the new ground was not sustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether Modvat credit was admissible on plastic crates used for transporting aerated water bottles prior to 17-11-1995.

Analysis: Plastic crates used for carrying bottles to make the final product marketable were treated as packaging material for the purpose of Rule 57A of the Central Excise Rules, 1944. The later two-Member Bench decision recognising admissibility prevailed over the earlier Single Member Bench view, and the credit position was therefore accepted for the relevant period.

Conclusion: Modvat credit on plastic crates was admissible prior to 17-11-1995 and the issue was decided in favour of the assessee.

Final Conclusion: The demand was set aside and the appellants were held entitled to consequential relief in accordance with law.

Ratio Decidendi: A demand cannot be sustained on a ground not included in the show cause notice, and plastic crates used as packaging material for marketable transport of the final product qualified for Modvat credit under Rule 57A.

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