Undisclosed evidence and natural justice require fresh adjudication of duty demand, while deliberate misdescription sustains confiscation and fine.

Duty demand and penalty based on alleged misdescription of yarn were set aside for fresh consideration because the adjudicating authority had relied on technical material and third-party discussions not disclosed to the assessee, denying an opportunity to rebut the evidence. The record therefore required de novo examination of the documentary material and any additional evidence. By contrast, confiscation of the seized yarn and the redemption fine were upheld because the statutory and private records showed deliberate recording of the goods as plain yarn, and the Tribunal found the discrepancy was not a mere clerical error.

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Issues: (i) Whether the duty demand and combined penalty relating to alleged clearance of DHCR yarn as DHPR yarn required remand for de novo consideration in view of the reliance on material collected behind the assessee's back and the need to examine the documentary evidence. (ii) Whether confiscation of the seized 16,633 kgs of yarn and the redemption fine were sustainable.

Issue (i): Whether the duty demand and combined penalty relating to alleged clearance of DHCR yarn as DHPR yarn required remand for de novo consideration in view of the reliance on material collected behind the assessee's back and the need to examine the documentary evidence.

Analysis: The findings on the alleged misuse of hank-yarn nomenclature were held to be vitiated because the adjudicating authority had relied upon technical material, personal study, and informal discussions with third parties without putting that material to notice of the assessee. In consequence, the assessee was entitled to produce rebuttal documentary evidence, and the record required fresh appreciation of the existing evidence as well as the additional material filed before the Tribunal. The demand for short levy and the combined penalty therefore could not stand on the present adjudication and had to be reconsidered afresh.

Conclusion: The duty demand and penalty were remanded for de novo consideration.

Issue (ii): Whether confiscation of the seized 16,633 kgs of yarn and the redemption fine were sustainable.

Analysis: The entries in the statutory and private records showed that the seized goods had been deliberately recorded as plain yarn, and the Tribunal found sufficient material to reject the plea of mere clerical error. On that factual footing, the seizure and the consequential confiscation were justified, and the redemption fine did not warrant interference.

Conclusion: The confiscation and redemption fine were sustained.

Final Conclusion: The adjudication on duty liability and penalty was set aside for fresh decision, while the confiscation of the seized goods and the redemption fine were upheld.

Ratio Decidendi: A demand or penalty founded on material relied upon behind the assessee's back cannot be sustained without affording an opportunity to meet that material, but deliberate misdescription of seized goods in the records can justify confiscation and fine.

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