Exemption notification denial cannot rest on a ground not disclosed in the show cause notice or hearing.

An exemption notification could not be denied on a ground not stated in the show cause notice or fairly put to the assessee at the personal hearing, because that would deprive the assessee of a meaningful opportunity to respond. The notice had proceeded on tariff classification, but the order ed the benefit on a different basis, namely that trade packs and sample packs were not different. As the new ground was outside the notice and not properly disclosed for defence, the denial of the notification was unsustainable and the assessee succeeded.

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Issues: Whether the denial of the exemption notification could be sustained when the impugned order proceeded on a ground not raised in the show cause notice or put to the assessee at the personal hearing.

Analysis: The show cause notice proceeded on classification of the products under different tariff headings and on proposed denial of the notification on the stated basis. The order, however, denied the benefit on a different footing, namely that trade packs and sample packs were not different. The record also showed that the assessee was not fairly put on notice of this specific basis for denial before the order was made. A benefit under an exemption notification cannot be refused on a ground that was not disclosed in the notice or effectively presented for response, as that would deprive the assessee of a meaningful opportunity of defence.

Conclusion: The denial of the notification on a new ground was unsustainable and the appeal was rejected.

Final Conclusion: The assessee succeeded because the adjudication could not rest on a basis outside the show cause notice and personal hearing.

Ratio Decidendi: An exemption benefit cannot be denied on a ground not stated in the show cause notice and not fairly put to the assessee for explanation before the order is passed.

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