Presumption of continued manufacture requires reliable evidence; differential excise duty for the full period was not sustained.

A presumption of continued manufacture at a particular specification may arise from direct inspection and sampling, but differential central excise duty for an extended period cannot be sustained unless the department first establishes the foundational fact by reliable evidence. The Court held that this presumption was not available on the facts because no fresh sample had been drawn and the case rested only on seized records, file contents, and employee statements. Test reports obtained for another purpose were also not treated as conclusive for the entire period. The lower appellate view restricting the demand was therefore left undisturbed, and the Revenue's challenge failed.

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Issues: Whether the demand of differential central excise duty for the entire period could be sustained on the basis of registers, file contents, and test reports, and whether a presumption of continued manufacture at a higher count could be drawn in the absence of fresh sampling.

Analysis: The dispute turned on whether the department had established, by reliable material, that the respondent was manufacturing yarn of a higher count than declared during the relevant period. The Court accepted that where an inspection reveals manufacture of a particular specification, a presumption may arise that the same specification continued until rebutted, drawing support from the evidentiary principle in Section 114 of the Indian Evidence Act, 1872. However, that principle was held inapplicable on the facts because no sample had been drawn at all by the department and the case depended only on seized records and employee statements. The Court found no clear finding by the authorities below that these materials conclusively established the basic fact of higher-count manufacture for the entire period. The Court also accepted the reasoning of the first appellate authority that the test reports obtained for another purpose were not necessarily representative of the production for the whole week.

Conclusion: The demand beyond the amount sustained by the Commissioner (Appeals) was not interfered with, and the Revenue's appeal failed.

Final Conclusion: The lower appellate view restricting the demand was left undisturbed, resulting in dismissal of the Revenue's challenge.

Ratio Decidendi: A presumption of continued manufacture at a particular specification may arise from direct inspection and sampling, but differential duty cannot be sustained for a larger period unless the department first establishes the foundational fact by reliable evidence.

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