1985 (5) TMI 153 - AT - Central Excise

Tribunal overturns Collector's duty orders due to errors in quantification and reliance on incorrect data.

The Tribunal concluded that the orders of the Collector and the Board could not be supported due to errors in the quantification of duty and the reliance ... CLASSIFICATION Issues Involved:1. Classification of asbestos yarn under Tariff Item (TI) 18E.2. Validity of the show cause notices and quantification of duty and penalty.3. Applicability of limitation period for the demand notices.4. Request for re-test and principles of natural justice.Detailed Analysis:1. Classification of Asbestos Yarn under TI 18E:The primary issue was whether the asbestos yarn manufactured by the appellants should be classified under TI 18E CET. The department argued that the yarn contained cotton and viscose staple fibres, making it classifiable under TI 18E. The appellants contested this classification, arguing that the cotton content was in the form of cotton yarn, not cotton fibre, and that the final process was braiding, not doubling.The Tribunal referred to previous judgments, including M/s. Porritts and Spencer (Asia) Ltd. v. Collector of Central Excise, Delhi, which held that yarn containing any two or more specified fibres, even if spun separately and then combined, falls under TI 18E. The Tribunal concluded that the asbestos yarn was classifiable under TI 18E, as the requisite for classification was the presence of any two or more specified fibres, not the method of spinning.2. Validity of the Show Cause Notices and Quantification of Duty and Penalty:The appellants argued that the show cause notices were based on incorrect assumptions and quantification of duty was flawed. The first show cause notice quantified duty based on the assumption that 46% of the final product was asbestos yarn, which was incorrect. The Collector's order, which relied on this percentage, was found to be erroneous.The second show cause notice also contained errors in quantification and relied on a non-existent test report. The Tribunal noted that the department's reliance on incorrect data and the absence of proper opportunity for the appellants to contest these figures invalidated the orders.3. Applicability of Limitation Period for the Demand Notices:The appellants contended that the demands were barred by limitation. For the first show cause notice, the Tribunal found that since the manufacture and removal of the yarn were without intimation to the authorities, the notice was not time-barred. However, for the second show cause notice, the Tribunal agreed with the appellants that the demand was time-barred, as the department was aware of the manufacture in 1973, and the notice was issued in 1978.4. Request for Re-test and Principles of Natural Justice:The appellants requested a re-test of the samples, which was denied by the department. The Tribunal held that even though the right to request a re-test was not explicitly provided in the rules at the time, it was a natural right. The denial of this right was improper, but the Tribunal found that it did not prejudice the appellants, as the duty liability was established regardless of whether the cotton was in fibre or yarn form.Conclusion:The Tribunal concluded that the orders of the Collector and the Board could not be supported due to errors in the quantification of duty and the reliance on incorrect data. The Tribunal set aside the impugned orders and allowed both appeals, noting that a de novo adjudication was unnecessary due to the lack of material for proper duty quantification.