Sampling from staged blending cannot govern the whole lot, and denial of test particulars vitiated the duty demand and penalty.

A sample taken from a fibre lot blended in stages could not automatically be treated as representative of the entire lot; the test result was confined to the quantity actually covered by that sample. The demand was therefore sustainable only to that limited extent, with quantification to follow accordingly. The assessee was also denied a fair opportunity because the exact test result was not supplied promptly and the request for retest was rejected without properly addressing the earlier request for particulars. On the facts, the marginal variation in fibre content and the absence of deliberate evasion meant the penalty could not stand and was set aside.

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Issues: (i) Whether the test result obtained from a sample drawn from a blended lot could be applied to the entire lot or only to the quantity actually blended when the sample was drawn; (ii) Whether the assessee was denied a fair opportunity by not being informed of the exact test result and by rejection of the request for retest; (iii) Whether the penalty imposed was sustainable.

Issue (i): Whether the test result obtained from a sample drawn from a blended lot could be applied to the entire lot or only to the quantity actually blended when the sample was drawn.

Analysis: The blend of fibres was not manufactured as one homogeneous mass on a single occasion, but was prepared in stages. In such circumstances, a sample drawn from one stage of blending could not safely be treated as representing the entire lot, particularly where the excess over the permissible percentage was marginal. The demand could therefore be sustained only with reference to the quantity actually covered by the sample.

Conclusion: The test result could not be applied to the entire lot and was confined to the quantity from which the sample was drawn.

Issue (ii): Whether the assessee was denied a fair opportunity by not being informed of the exact test result and by rejection of the request for retest.

Analysis: The assessee had asked for the exact percentage reported in the test and indicated that it would seek retest if necessary, but that information was not supplied for a long time. The later rejection of the retest request on the ground of delay overlooked this earlier request and the absence of the necessary particulars. The assessee was therefore denied a proper opportunity to meet the demand.

Conclusion: The adjudication was vitiated for want of fair opportunity, and the confirmation of duty could not stand in the form in which it was made.

Issue (iii): Whether the penalty imposed was sustainable.

Analysis: The variation in fibre content was marginal and the record did not establish deliberate evasion. On the facts, the explanation offered for the variation was not unreasonable.

Conclusion: The penalty was unsustainable and was rightly set aside.

Final Conclusion: One appeal succeeded entirely, while the other succeeded in setting aside the penalty and the duty confirmation, with the duty aspect being sent back only for quantification confined to the relevant portion of the lot.

Ratio Decidendi: A sample drawn from a lot blended in stages cannot automatically govern the entire lot, and an assessee must be afforded a fair opportunity to know the exact test result and seek retest before a demand is confirmed.

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