2014 (3) TMI 160 - AT - Central Excise

Manufacturing of Paan Masala - The dispute in the present appeals relates to the percentage of betel nuts. - If the same exceeds 15%, the product would get covered under the purview of notified goods as per the provisions of Section 3A of the Central Excise Act, 1944 and the appellants would required to pay duty in terms of Paan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. - Held that - if the samples were not sent to Shri Ram Institute for Industrial Research, the Revenue has to take a categorical stand and should have contested the said stand of the appellants. If the samples have actually been sent to Shri Ram Institute for Industrial Research and have actually been registered by them, the test report of the same is required to be made known to the appellants and should be relied upon by the adjudicating authority so as to give a justifiable finding. Appellants made a request for re-test of the samples - no justifiable reason for denying the said request of the appellants. The Delhi Test House Report is subsequent to the passing the present impugned order, but in as much as the same shows the presence of betel nut to the extent of 9.8% and in view of the fact that we have already expressed our unhappiness over the manner of sending of samples to CRCL a report of Shri Ram Institute for Industrial Research, we deem it fit to set aside the impugned order and remand the matter to the original adjudicating authority for re-examining the matter in the light of the observations made by us in the preceding paras. - Decided in favor of assessee by way of remand.

Issues:
1. Violation of principle of natural justice in passing the impugned order by the Commissioner.
2. Dispute regarding the percentage of betel nuts in the product.
3. Late forwarding of samples for testing and discrepancy in sample weights.
4. Request for disclosure of test results from Shri Ram Institute for Industrial Research.
5. Denial of cross-examination opportunity and re-testing of samples.
6. Consideration of test reports from different laboratories.
7. Decision to set aside the impugned order and remand the matter for re-examination.

Issue 1: Violation of principle of natural justice
The judgment highlighted a violation of the principle of natural justice in passing the impugned order by the Commissioner. The appellate judges emphasized the importance of allowing the stay petitions and then taking up the appeals for disposal due to this violation. The judges noted that the order confirmed a demand of over Rs. 58 crores against a company and imposed penalties without proper consideration of natural justice principles.

Issue 2: Dispute over betel nut percentage
The main issue in the appeals was the dispute regarding the percentage of betel nuts in the product. The judgment detailed the process of sample collection, testing, and the conflicting reports on the betel nut content. The appellants argued that the samples tested did not accurately represent the product's composition, emphasizing the relevance of the betel nut percentage in the final product for duty determination.

Issue 3: Late sample forwarding and weight discrepancy
The judgment highlighted concerns about the late forwarding of samples for testing and the discrepancy in sample weights. The appellants raised objections to the handling of samples, including discrepancies in weights and the relevance of samples collected from the hopper versus the final product. The judges found merit in the appellants' arguments regarding the handling and testing of samples, questioning the accuracy and process followed by the authorities.

Issue 4: Request for disclosure of test results
The appellants requested the disclosure of test results from Shri Ram Institute for Industrial Research, highlighting discrepancies in the handling of test reports from different laboratories. The judgment noted the lack of clarity from the Revenue regarding the samples sent for testing and emphasized the importance of transparency in disclosing all relevant test results to ensure a justifiable finding.

Issue 5: Denial of cross-examination and re-testing
The judgment addressed the appellants' grievances regarding the denial of cross-examination opportunities and the rejection of a request for re-testing of samples. The judges found fault with the adjudicating authority for not allowing proper cross-examination and failing to consider the appellants' request for re-testing within the specified period, raising doubts about the accuracy of the testing process.

Issue 6: Consideration of test reports from different laboratories
The judgment considered the test reports from different laboratories, including the Delhi Test House and Shri Ram Institute for Industrial Research. The judges highlighted the relevance of these reports in assessing the betel nut content and criticized the Revenue for not adequately addressing the discrepancies between the reports and the handling of samples. The judgment emphasized the need for a comprehensive re-examination of the matter based on all available test reports.

Issue 7: Decision to set aside the impugned order
Ultimately, the judges decided to set aside the impugned order and remand the matter to the original adjudicating authority for re-examination. The judgment allowed the appellants to raise all relevant issues before the authority and emphasized the importance of a thorough reassessment of the case, considering the discrepancies and concerns highlighted throughout the judgment. The judges expected prompt action due to the significant revenue involved in the case.

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