1986 (12) TMI 170 - AT - Central Excise

Summary

Issues involved: Classification of woollen yarn under tariff item No. 18 - B(i) CET, failure to file proper classification list, duty demand, penalty imposition, natural justice principles violation, variation in test results, blending of constituent fibres, representative sample issue, penalty imposition justification.

Classification and Duty Demand Issue:
The woollen yarn spun by the appellants was found to have different fibre composition than declared, leading to a dispute on proper classification under tariff item No. 18 - B(ii) CET. The chemical examiner's report supported the classification under item 18-B(ii) CET, resulting in a duty demand on the appellants. The Collector of Central Excise upheld the charges and demanded duty along with imposing a penalty, which was later reduced by the Central Board of Excise and Customs. The appellants challenged this order, leading to the present appeal.

Natural Justice and Test Results Variation Issue:
The appellants requested a retest after the initial test results, claiming a failure in following principles of natural justice when the retest was declined. However, the results of both tests indicated excess nylon content, contrary to the appellants' claims. The argument regarding variation in test results was dismissed as the difference was not significant.

Blending of Constituent Fibres and Representative Sample Issue:
The appellants contended that blending of constituent fibres occurred on different occasions due to receiving materials piece-meal, challenging the department's reliance on the test results as conclusive for the entire lot. The appellants provided evidence of receiving materials on various dates, indicating that the sample drawn on 15.7.1980 was not representative of the total quantity spun. The appellants' argument was supported, highlighting that the test sample could only be applied to the blend available on the sampling date.

Penalty Imposition Justification Issue:
The penalty imposition was contested based on the unintentional increase in nylon fibre usage, which the Board accepted. The appellants argued for setting aside the penalty entirely, given the Board's finding of no intention to evade duty. The penalty imposition was deemed unjustified, leading to the appeal's partial success in setting aside the penalty and modifying the duty demand based on the blend available during sampling.

This judgment addresses the classification and duty demand dispute, considerations of natural justice in test result evaluation, the significance of blending constituent fibres in determining sample representativeness, and the justification for penalty imposition based on the intention behind the fibre composition discrepancy.