Notification exemption for underwater batteries upheld where demand failed for lack of proper examination and application of mind.

Classification of underwater batteries under Serial No. 3 of Notification No. 64/95-CE turned on whether the authorities properly examined the nature of the goods and the basis of the demand. The record showed that the show cause notice was incomplete and inconsistent, the adjudication did not address the reply or the actual product description, and the order was passed after an inordinate delay of about ten years. On that material, the demand was unsustainable for want of proper application of mind, and the assessee was entitled to the notification benefit.

---

---

Issues: Whether the demand and the orders below could be sustained when the goods were claimed to fall under Serial No. 3 of Notification No. 64/95-CE dated 16.3.95 and the adjudication proceeded without proper consideration of the show cause notice, the reply, and the actual nature of the goods.

Analysis: The record showed that the nature of the goods as underwater batteries had not been properly examined by the authorities below. The show cause notice also reflected an incomplete and inconsistent basis for the demand, while the adjudication was passed after an inordinate delay of about ten years from the notice. On this material, the adjudication was found to be without application of mind and the order of the appellate authority was unsustainable. The appellant was held entitled to the benefit of Serial No. 3 of the notification.

Conclusion: The demand could not be sustained and the impugned order was set aside in favour of the assessee.

---