2013 (5) TMI 651 - HC - Central Excise

Rate of excise duty - re-testing of the samples - classification - manufacturer of rubber sheets - The department relied upon the test report dated 5.8.2010, given by the Director, FDDI, Noida, and the test report dated 29.3.2011, given by the Rubber Institute, Thane, Maharashtra. - The petitioner s request for re-testing the samples was rejected by the Additional (Technical), Central Excise, Kanpur - held that - The provisions of the Central Excise Act provide for imposition of penalty and interest, for non payment of duty. The consequence may also result into quasi criminal liability on the manufacturer. In the circumstances, we are of the opinion that the denial of the statutory right for retesting the sample amounts to violation of principles of natural justice resulting into serious civil and criminal liability. Where the application for retesting, comply with these conditions, it should be invariably allowed. The application may not be rejected on the ground that the testing was done by Government recognized independent labs, and that the test reports are clear and complete. Re-testing allowed - decided in favor of assessee.

Summary

Issues involved:
Classification of rubber sheets under Central Excise Tariff Act, 1985; Allegation of resin usage in manufacturing; Denial of request for retesting of samples by Central Excise Department; Statutory right for retesting under CBEC's Excise Manual; Violation of principles of natural justice; Imposition of penalty and interest for non-payment of duty.

Classification of rubber sheets under Central Excise Tariff Act, 1985:
The petitioner, a manufacturer of rubber sheets used in footwear, faced a show cause notice alleging misclassification under tariff entry 40082910, attracting higher duty rates. The department relied on test reports from recognized institutions. However, the petitioner disputed the clarity and completeness of the reports, requesting retesting to prepare a proper defense.

Denial of request for retesting of samples by Central Excise Department:
The petitioner sought retesting under CBEC's Excise Manual, citing dissatisfaction with the test reports. Despite statutory provisions allowing retesting within 90 days, the department denied the request based on the completeness and clarity of the initial reports. The High Court found this denial to violate principles of natural justice, potentially leading to civil and criminal liabilities.

Statutory right for retesting under CBEC's Excise Manual:
The Court emphasized the statutory right for retesting samples, irrespective of the department's satisfaction with initial reports. The petitioner's dissatisfaction with the test results, as per statutory provisions, warranted the opportunity for retesting. The denial of this right was deemed unjust and contrary to established legal principles.

Violation of principles of natural justice:
The Court highlighted that denial of the statutory right for retesting samples could lead to severe consequences, including penalties and criminal liabilities. Upholding the principles of natural justice, the Court ruled in favor of allowing the petitioner's request for retesting, emphasizing the importance of statutory rights and due process.

Imposition of penalty and interest for non-payment of duty:
The judgment underscored the potential consequences of non-payment of duty, including penalties and interest. The Court's decision to allow retesting aimed to ensure fairness and adherence to statutory provisions, preventing unjust penalties or liabilities on the petitioner. The ruling prioritized upholding legal rights and ensuring a just process in excise duty matters.