2000 (11) TMI 482 - AT - Central Excise

Summary

Issues: Allegation of duty evasion by removing eyebrow pencils without payment, reliance on Chemical Examiner's report, applicability of test results to cleared goods, burden of proof on Revenue, classification of goods.

In this case, the appellant was accused of removing eyebrow pencils without paying duty and using a special quality black pencil guise to evade taxes. The show cause notice required a pre-deposit of a specific amount and penalty under Rule 173Q of the Central Excise Rules. The dispute centered around whether the goods cleared were indeed eyebrow pencils, subject to duty, or exempted pencils. The Chemical Examiner's report indicated that the items sent for examination were "eyebrow pencils - beauty or make-up preparations," implying duty liability. The appellant argued that they had only cleared exempted black pencils with different ingredients from eyebrow pencils, emphasizing the lack of seizure of the goods in question and challenging the applicability of test results from stock samples to cleared goods.

The appellant contended that the test results were based on samples from the factory stock, not the cleared goods, and thus could not definitively prove the nature of the cleared items. They highlighted discrepancies in ingredients and breakability between eyebrow pencils and the black pencils cleared. The appellant also criticized the reliance on the Chemical Examiner's report without direct evidence linking it to the cleared goods. They cited a previous Tribunal judgment to support their argument that test results should apply prospectively and that the Revenue failed to collect and test samples from the cleared goods, shifting the burden of proof onto them.

The Revenue defended the order, asserting that the test results from stock samples could be applied to the cleared goods. However, the Tribunal scrutinized the Chemical Examiner's report, noting its ambiguity in definitively identifying the tested samples as eyebrow pencils. The Tribunal emphasized the Revenue's failure to prove that the cleared goods were indeed eyebrow pencils, as no samples were taken from the consignments in question, and no direct evidence linked the test results to the cleared goods. The Tribunal concluded that the burden of proof lay with the Revenue, which they had not discharged, leading to the acceptance of the appellant's plea and the setting aside of the impugned order, thereby allowing the appeal.