Show cause notice scope and Modvat credit limits determined excise demand; excess demand was set aside.

A central excise demand cannot be confirmed beyond the scope of the show cause notice, so the portion relating to clearances outside the three AR3A entries was set aside. The notice was not invalid merely because it did not state a quantified duty figure, as the AR3A-wise particulars were sufficient to compute liability. Modvat credit was not admissible on inputs used in final products cleared without payment of duty for the period before 1-3-1992, so the demand relating to the three covered clearances was sustained.

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Issues: (i) Whether the demand was unsustainable to the extent it travelled beyond the three AR3A clearances mentioned in the show cause notice; (ii) Whether the show cause notice was invalid for not quantifying the duty amount; (iii) Whether Modvat credit was admissible on inputs used in final products cleared without payment of duty prior to 1-3-1992.

Issue (i): Whether the demand was unsustainable to the extent it travelled beyond the three AR3A clearances mentioned in the show cause notice.

Analysis: The notice and its annexure were confined to three AR3A clearances, but the adjudication order included clearances outside that scope, including a further period not covered by the notice. A demand cannot be confirmed beyond the limits of the notice issued to the assessee.

Conclusion: The demand in excess of the three AR3A clearances mentioned in the show cause notice was not sustainable and was set aside to that extent.

Issue (ii): Whether the show cause notice was invalid for not quantifying the duty amount.

Analysis: The notice specified the AR3A-wise quantities, which enabled computation of the duty liability. Unlike a notice that merely calls upon payment for an unspecified period without parameters, this notice contained sufficient particulars to work out the demand.

Conclusion: The show cause notice was not invalid for want of quantification of duty.

Issue (iii): Whether Modvat credit was admissible on inputs used in final products cleared without payment of duty prior to 1-3-1992.

Analysis: The final products were cleared without duty, and for the relevant period prior to 1-3-1992 the rule against Modvat credit on inputs used in exempt final products applied. On that basis, credit was not available on such clearances.

Conclusion: Modvat credit was not admissible for the duty-free clearances covered by the three AR3A notices, and the demand to that extent was upheld.

Final Conclusion: The appeal succeeded only to the limited extent of the demand made beyond the clearances covered by the show cause notice, while the demand relating to the three covered clearances was sustained.

Ratio Decidendi: A demand under the central excise law cannot travel beyond the scope of the show cause notice, and Modvat credit is not allowable on inputs used in final products cleared without duty where the governing rule prohibits such credit.

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