Undisclosed departmental report and inadequate verification vitiated classification and exemption findings; matter remanded for fresh adjudication.

Classification and exemption findings were set aside where the authorities relied on an undisclosed departmental report and did not properly verify the machining process or end-use of the goods. The record showed that the assessee had produced certificates and sample material indicating that the work required to make the goods fit for use was carried out by the assessee itself, but this evidence was not adequately examined. The matter was remanded for fresh adjudication after verification of the actual manufacturing process, consideration of the assessee's evidence, and grant of a personal hearing.

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Issues: Whether the order confirming classification and denial of exemption could be sustained where reliance was placed on an undisclosed departmental report and the factual basis regarding machining and end-use of the goods had not been properly verified.

Analysis: The impugned orders were found to have proceeded on a report that had not been disclosed to the assessee for comments and on facts that had not been personally verified. The record also showed that the assessee had produced certificates and sample material indicating that the activities necessary to make the goods fit for use were carried out by the assessee itself. In these circumstances, the findings of the lower authorities were treated as unsupported by proper factual examination and as having resulted in denial of a fair opportunity. The matter therefore required fresh adjudication after verification of the actual manufacturing process, consideration of the assessee's evidence, and a personal hearing.

Conclusion: The orders below were set aside and the matter was remanded to the original authority for de novo consideration in accordance with law.

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