Duty demand on presumed product classification fails where sample testing cannot be extended beyond the sampled lot.

Duty could not be demanded on the presumption that all clearances described as hair beltings were processed cotton beltings, because the record did not conclusively establish their character and there was no documentary proof to support the inference. The figures furnished by the assessee were not an admission that the goods were cotton beltings, and a sample tested on 7-6-80 could apply only to the lot sampled. In the absence of any established basis for prospective sampling or retrospective application, the penalty under Rule 173Q also could not be sustained.

---

---

Issues: Whether duty could be demanded on the footing that all the clearances described as hair beltings were in fact processed cotton beltings and whether penalty under Rule 173Q of the Central Excise Rules, 1944 could be sustained on that basis.

Analysis: The available material did not conclusively establish that the clearances shown as hair beltings were all processed cotton beltings. The figures furnished by the appellants did not amount to an admission that the goods were cotton beltings, and in the absence of documentary evidence the Collector could not presume that all the goods were liable to duty as processed cotton beltings. The sample tested on 7-6-80 could, at most, govern the lot from which it was drawn and could not be extended retrospectively to past clearances in the absence of any established practice of prospective sampling. There was also no material to show that later clearances of the same type after 7-6-80 were liable to duty on the basis assumed in the order under appeal.

Conclusion: The demand for duty and the penalty could not be sustained and the appellants were entitled to the benefit of doubt.

Final Conclusion: The appeal succeeded and the order under appeal was set aside.

Ratio Decidendi: A duty demand cannot rest on presumption alone where the record does not conclusively establish the character of the goods, and the result of a sample test cannot be applied beyond the lot sampled or retrospectively to past clearances without a legally established basis.

---