Natural justice in excise classification requires a fair hearing before tariff classification affecting duty liability is decided.

A quasi-judicial excise authority must give manufacturers a reasonable opportunity of hearing before classifying goods where the determination affects duty liability. The Rajasthan HC held that the Assistant Collector's classification of cellulosic spun yarn under Item 18(III)(ii) could not stand because no effective hearing was afforded to the petitioners. The absence of prior opportunity amounted to a breach of natural justice and vitiated the order. The classification was therefore quashed, and the matter had to be decided afresh after granting an adequate hearing.

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Issues: Whether the Assistant Collector's classification order under Item 18(III)(ii) of the Schedule annexed to the Central Excises and Salt Act, 1944 was liable to be set aside for breach of natural justice because no effective hearing was afforded to the manufacturers.

Analysis: The dispute turned on the classification of cellulosic spun yarn under Item 18(III)(i) or Item 18(III)(ii) of the Schedule. The record showed that the petitioners were not heard before the Assistant Collector passed the order treating the goods as falling under Item 18(III)(ii). The authority deciding such classification acted in a quasi-judicial capacity and was required to afford a reasonable opportunity of hearing before making a determination affecting duty liability. In the absence of such opportunity, the order could not be sustained. The earlier view taken in the connected Jaipur proceedings was also accepted as correctly stating the legal position.

Conclusion: The classification order was rightly quashed and the matter was required to be decided afresh after giving the petitioners an adequate opportunity of hearing.

Ratio Decidendi: A quasi-judicial excise authority must afford a reasonable opportunity of hearing before determining the tariff classification of goods where the decision affects duty liability; failure to do so violates natural justice and vitiates the order.

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