2012 (9) TMI 342 - CGOVT - Central Excise

Export of goods Drawback claim Denial of drawback claim is based on test report retest of remnant samples - Held that - Denial of drawback claim on the basis of first test report cannot be held to be legal and proper - Department has not been able to produce any other evidence confirming misclassification of goods - in the absence of retest of remnant samples as the remnant samples were not available - original authority directed to sanction the drawback claims

Issues Involved:
1. Legitimacy of the request for retesting of samples.
2. Compliance with the High Court's directives for retesting.
3. Admissibility of new evidence under Rule 5 of Customs (Appeal) Rules, 1982.
4. Validity of the initial test report and its implications on the drawback claim.
5. Procedural fairness and principles of natural justice.

Detailed Analysis:

1. Legitimacy of the Request for Retesting of Samples:
The applicant department argued that the respondent never made a formal plea for retesting during the initial adjudication stages. However, the Government noted that the respondent had indeed requested retesting in their letter dated 21-10-2003, which was acknowledged by the Custom House, Calcutta. This contradicts the department's claim and establishes that the request for retesting was made timely.

2. Compliance with the High Court's Directives for Retesting:
The High Court of Kolkata directed the Customs Department to retest the samples multiple times. Despite this, the department failed to comply, later claiming that the samples were lost. The Government observed that this fact was not disclosed during the High Court proceedings, indicating a lack of transparency. The department's failure to retest the samples as per the High Court's orders undermines their position.

3. Admissibility of New Evidence under Rule 5 of Customs (Appeal) Rules, 1982:
The department contended that the Commissioner (Appeals) should not have accepted new evidence. However, the Government clarified that ordering a retest of remnant samples does not constitute the production of additional evidence but aligns with the principles of natural justice. The Commissioner (Appeals) acted within their jurisdiction to ensure a fair decision.

4. Validity of the Initial Test Report and Its Implications on the Drawback Claim:
The original authority rejected the drawback claim based on the initial test report, which indicated the goods were made of cotton and polyester instead of silk. The Government noted that the foreign buyer confirmed receiving 100% silk garments, and the respondent received foreign exchange for the consignment. The lack of a retest report to challenge the initial test report weakens the department's case. The Government emphasized that the denial of the drawback claim based solely on the initial test report, without retesting, is not justified.

5. Procedural Fairness and Principles of Natural Justice:
The Government highlighted that the respondent's request for retesting and cross-examination of the Assistant Chemical Examiner was denied by the adjudicating authority, which is a violation of natural justice. The Commissioner (Appeals) allowed the retest to ensure fairness. The Government concluded that the denial of retesting, especially when the case hinges on it, constitutes a violation of natural justice. Thus, the benefit of doubt should favor the respondent.

Conclusion:
The Government rejected the Revision Application, directing the original authority to sanction the drawback claims. The decision underscores the importance of procedural fairness, adherence to judicial directives, and the necessity of retesting in ensuring just outcomes.

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