Exemption for 210 denier yarn upheld where missing test reports created an adverse presumption against the Department.

Excise duty demand on 210 denier yarn exempt under Notification No. 31/93-C.E. could not be sustained where the material test evidence was incomplete. The first sample analyses showed variance, a retest was sought, but the second test report was not produced and the third sample report was never received. That evidentiary gap, combined with the absence of proof of dispatch or receipt of the third sample, led to an adverse presumption against the Department for withholding the best available evidence. The demand therefore failed.

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Issues: Whether the excise duty demand could be sustained when the second chemical test report was not produced and the third sample report was not received, despite variance in the sample analyses for 210 denier yarn claimed to be exempt under Notification No. 31/93-C.E., dated 28-2-1993.

Analysis: The duty demand turned on whether the goods satisfied the exemption condition for 210 denier yarn with the permitted tolerance. The record showed variance in the first set of test results and a request for retesting, but the second test report was not placed on record even though it was material to determine exemption eligibility. The absence of that report, together with the unexplained failure of the third sample to reach the laboratory and the lack of proof of dispatch or receipt, created a serious evidentiary gap. In these circumstances, an adverse presumption arose against the Department for withholding the best available evidence.

Conclusion: The duty demand could not be sustained and the appeal succeeded.

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