ORDER
V.T. Raghavachari, Member (J)
1. On the application for restoration of appeal being taken up Shri C.S. Lodha, Advocate, representing the appellants, submitted that for the hearing on 30.5.86 the appellants had received notice on 30.4.86 and, shortly thereafter, on 9.5.86, they sent a letter by Registered post seeking adjournment of the hearing but that this letter does not appear to have been placed before the Bench on 30.5.86 resulting in the dismissal of the appeal for default and in the circumstances the appeal may now be restored to file. In view of the said fact Shri Vineet Kumar for the Department did not oppose the application. Accordingly, the order of dismissal dated 30.5.86 was set aside and the appeal was restored to file.
2. Thereupon the appeal was taken up for hearing. The appellants had exported animal food (compound). The same was exported free of duty in terms of Notification No. 16-Cus. dated 22.1.77 on the basis that the animal food contained not more than 40% protein content. Subsequently under orders dated 18.6.79 and 21.9.79 the Asstt. Collector ordered recovery of duty pointing out that the animal food exported contained more than 40% of protein. He relied upon tests by the Custom House Laboratory under report dated 7.4.79 in this behalf. The appellants preferred two appeals to the Appellate Collector of Customs which were disposed of by the Collector under a common order dated 31.7.81. Under the same he up held the orders of the Assistant Collector. The revision petition preferred by the appellants against the said order-in-appeal is the present deemed appeal before us.
3. Shri Lodha contended that no hearing had been granted to the appellants before the Assistant Collector passed his orders and that no show cause notice had been issued to them before the said orders were passed. He, therefore, contended that the assessments by the Assistant Collector were bad even under section 28 of the Customs Act as no show cause notice had been issued within the 6 months’ period mentioned in the said provision. The order of the Appellate Collector reads that “as goods had been allowed to be cleared provisionally no show cause notice was necessary before finalizing the assessments.” Apart from this contention the further contention of Shri Lodha is that the appellants had obtained test report from the General Superintendence Company (India) Pvt. Ltd. dated 23.5.77 before the export of the goods and the same disclosed protein content to be not more than 40% but that disregarding the same the authorities have relied upon a test report of the Custom House Laboratory regarding test done on 7.4.79, nearly two years after the drawal of the samples, and in the circumstances the said test report ought not to have been accepted. The order of the Assistant Collector dated 18.6.79 refers to the protein content to be 40.30% according to the Custom House test. The copy of the report filed by Shri Lodha, as given to his clients, refers to the protein contents as 40.18%. Neither side is able to throw any light on this discrepancy.
4. The main contention of Shri Lodha is that in view of this large time lapse between the date of drawal of sample and the date of test, the sample would have undergone chemical changes resulting in the enhancement of the percentage of protein contents. He therefore contends that on this ground itself the test report should have been ignored. He points out (in support of his contention as to the likelihood of change in chemical composition due to. lapse of time and exposure to humid air) that the appellants had produced an affidavit of Dr. R.C. Badami but that the Collector has not even discussed the said affidavit. He further points out that when the appeal before the Collector came up in the first instance with reference to a prayer for stay, the then Appellate Collector (Shri M.G. Vaidya) did pass an order dated 27.11.79 accepting that the arguments of the appellants about the possibility of change in chemical composition being prima facie correct. Shri Vineet Kumar, on the other hand, contended that the Appellate Collector has pointed out that the sample had been ascertained to have been kept throughout the period of storage in air tight sealed containers and therefore there could have been no possibility of Chemical decomposition during storage. He therefore contended that the conclusion of the Appellate Collector was correct.
5. In this connection Shri Lodha relied upon a decision of the Supreme Court – Nebh Raj v. The State (AIR 1981 SC 611) and a decision of the Punjab High Court – Ram Narain v. The State 1978(1) FAC 30. Both were decisions under the Prevention of Food Adulteration Act. The Supreme Court observed that when the test was done by the Central Food Laboratory nearly 3 years after the sample was taken there was every possibility of the percentage of free fatty Acid in the sample having risen due to Chemical changes during this time lapse. The sample tested was of Dal Biji. The Supreme Court observed that oxidation due to exposure of air has an effect of increasing the free fatty acid contents of edible fats and oils. The product considered in the case before the Punjab High Court was Til Oil. The High Court observed that there was no evidence to show that the sample was properly protected before the test was done. Shri Lodha relied on these decisions to contend that in the present case also the increase in the protein contents must be held to have been due to lapse of time. As earlier mentioned the Collector rejected this contention observing that “it has been ascertained separately that throughout the period of storage the samples had been kept in air tight sealed covers.” Therefore, it is on this basis that the Collector had held that lapse of time could not have led to any chemical change resulting in increase of protein contents. Shri Lodha contends that the Collector appears to have obtained certain information on this aspect which was not even disclosed to the appellants and therefore the Collector was not entitled to take this fact into consideration in arriving at any conclusion on the arguments advanced by the appellants.
6. It is seen that the decisions relied on by the appellants proceed on the basis that if the sample is kept exposed to atmospheric condition, including high humidity there is every possibility of chemical changes taking place, leading to increase of protein contents. The affidavit of Shri Badami is also to the effect :
“I say that oil-cake and compound feed samples also will show significant increase in protein content – if it is stored for a long period of one to two years under high humidity conditions of 50 to 90% R.H. I say that such high humidity conditions are usually found in coastal regions like Bombay or Goa. I say that the increase in protein content is thus also due to infection of the sample by microflora or fungus under high humidity conditions.”
Therefore, the question whether the increase in protein contents could have been due to lapse of time would depend on the fact whether the sample had been kept exposed to air and high humidity and could have been affected by oxidation. As noted earlier, the Collector appears to have obtained information, evidently from the Custom House Test Laboratory, that the sample had been kept in air tight sealed containers, thus avoiding exposure to air or humidity. But, as pointed out by Shri Lodha, he had not disclosed this information on the appellants and therefore did not allow them an opportunity to challenge the veracity of this assertion. In the circumstances there can be no doubt that the appellants had been prejudiced in the presentation of their case on this aspect, when the Collector relied on information which was relevant but not disclosed to the appellants.
7. In the circumstances, we feel that the proper course to be adopted would be to set aside the order of the Collector and remit the matter to him for de novo consideration so that he may make available to the appellants information obtained by him regarding the conditions of storage before test and afford an opportunity to the appellants to contest the same, if desired, and thereafter dispose of the matter. In doing so, he will go into the question whether the assessments initially were provisional and therefore the period of 6 months mentioned under section 28 would not be attracted.
8. Accordingly, this appeal is allowed and the order of the Appellate Collector is set aside and the matter is remanded to the Collector of Customs (Appeals) Bombay for de novo adjudication in the light of the observations earlier and disposal thereafter in accordance with Law.