Unproved classification and time-barred duty demand on rock phosphate powder could not be sustained

Duty and penalty on rock phosphate powder could not be sustained because the department relied on undisclosed and untested material, including invoices and later factory practice, without giving the assessee a fair chance to rebut it. The record also did not contain reliable evidence to establish the fineness or taxable character of the goods as fertiliser, so the classification basis failed. The demand was additionally barred by limitation under the applicable rule. The impugned orders were set aside and the appeal was allowed.

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Issues: Whether the demand of duty and penalty on the rock phosphate powder cleared during 1974-75 was sustainable in law, including the questions of classification, evidentiary support, and limitation.

Analysis: The demand could not be sustained where the basis relied upon by the department, including invoices treated as showing clearance of fertilisers and the practice of a later-established factory, had not been disclosed to the appellants for rebuttal. The record also did not contain reliable evidence establishing the fineness of the goods cleared during the relevant period, so no sound finding could be reached that the product was fertiliser. On the material before it, the Board further held that the demand was barred by time under the applicable limitation rule.

Conclusion: The duty demand and penalty were held unsustainable and the appeal was allowed.

Final Conclusion: The impugned orders were set aside because the classification finding lacked disclosed and reliable evidentiary support and the demand was also barred by limitation.

Ratio Decidendi: A duty demand cannot be upheld on the basis of undisclosed or unproved evidence, and where the material on record does not establish the taxable character of the goods, the demand fails, especially if it is also time-barred.

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