ORDER
S.L. Peeran, Member (J)
1. In this appeal, the appellants M/s. Adarsh Spinning Mills have challenged the impugned order-in-original No. 4/CE/84, C.No. V(18-B) Add!. Collr. 15/5/AAR/83/1981 dated 28-2-1984 passed by the Additional Collector, Central Excise, Chandigarh, under Section 35-B of the Central Excises & Salt Act.
2. To sum up the facts briefly, the appellants were issued with show cause notice dated 8-2-1983 for contravention under Rules 9(1), 52-A, 53, 173-F, 173-G and 226 of the Central Excise Rules, 1944, in which it was alleged that on 6-11-1982, the Inspector of Central Excise, Range III, Ludhiana visited the factory premises and drew samples from lot of Worsted Woollen yarn containing wool 70%, nylon 14% and viscose 16% falling under Tariff Item 18-B(1), as intimated by the party vide letter dated 2-11-1982. As per blend register, the number of the lot assigned was 15 dated 2-11-1982. The Inspector drew a representative sample in quadruplicate from above-mentioned running lot No. 15 and one of the samples was sent to the Chemical Examiner, New Delhi for the chemical analysis of the composition of the said yarn. The Chemical Examiner reported that the sample is three ply khaki coloured spun yarn composed of 67.1% (sixty-seven decimal one) wool fibres 17.6% (Seventeen decimal six) man made fibres of non-cellulosic origin polyamide (Nylon) and 15.3% (Fifteen decimal three) man made fibres of cellulosic origin. On the basis of this test report, the appellants were charged that the yarn manufactured by the party was dutiable yarn falling under Tariff Item 18-B(ii) and attracted Central Excise duty @ Rs. 18/- per kg. as BED, 15% of BED as A.D. and 10% of BED as SED. As per the blend register, the total Worsted Woollen yarn manufactured from the said lot and cleared was 2122 kgs 100 gms. of dutiable yarn under Tariff Item 18-B(i) involving Central Excise duty of Rs. 47,747.25 P. only (BED Rs. 38,197.80 P.; AED Rs. 5,729.67 P. and SED Rs. 3,819.78 P.) and hence they were called upon to show cause as to why the Central Excise duty involved in the case should not be demanded from them under Rule 9(2) of the Rules. The appellants by the letter dated 19-1-1983 disputed the result of the chemical test. The appellants in that letter submitted that they had a few months ago, met the said Assistant Collector with some of the industrialists who manufactured such blend of yarn (i.e. yarn containing wool 70%, Nylon 14% and viscose 16%) and had brought to his notice of the threats they were getting from the office of the Chief Chemical Examiner, Delhi that if they do not pay, than the samples were bound to fail. In the same meeting they had sought for samples to be sent to some other laboratories and as such, the appellants by letter dated 19-1-1983 sought the second or third sealed samples which were in the Department to be sent for retest-ing to Punjab Test House, Ludhiana which is a Government recognised Test House. They further stated in the said letter that they were in trade for 9 years and that for the first time the sample had failed.
3. However, the remnant sample was sent again to the same Test House at Delhi and the same result was reported. The office intimated by letter dated 26-9-1983 about it to the appellants. The appellants again disputed the second test result by their letter dated 23-11-1983 addressed to the Addl. Collector and sought for the re-test of the second and third sample instead of the remnant sample sent for re test. They brought to the notice of the Addl. Collector of their reasonable apprehension also. The Addl. Collector by his letter dated 17-12-1983 informed them that it was not found feasible to send the sample for re-test and hence called upon them to file their objections to the show cause notice. The appellants, therefore, filed their detailed reply dated 6-1-1984 in which they disputed among other things, the remnant sample being sent for re-test instead of second or third sample and again sought for retest of these samples. The learned Addl. Collector without conceding to their request passed the impugned order confirming the demands made in the show cause notice on the basis of the test result received by them and on the ground that the appellants had mis-declared the contents of the yarn.
4. The Counsel for the appellants, Smt. Atehana Wadhawa submitted that the authorities below had committed a serious error in accepting the test result despite the appellants having brought to the notice of the Addl. Collector in their meeting with several manufacturers some months ago the demands of money and threats being issued from the office of the Chief Chemical Examiner, New Delhi. The Counsel further argued that the authorities had committed an error in sending the remnant sample for retest omstead of the second and third sample and hence the result of the second test should not have been accepted. Further, she submitted that the Addl. Collector had committed an error in demanding duty on the entire yarn produced in lot No. 15 on the basis of result of test of sample drawn on 6-11-1982. The order had not assigned any reasons for which the test result could be applied for the entire lot. The further contention of the appellants had been that having regard to the manner of spinning of yarn on worsted system and blending operation of various kinds of tops in the gill boxes in small weights from time to time and also in view of the non-uniformity in weight per metre of locally made nylon tops, marginal variation in nylon content of yarn at various points is inevitable and unavoidable and hence the result of laboratory test of a particular length of yarn should not be accepted as applicable to the entire lot. They further submitted that yarn having 17.1% as per composition shown by laboratory test is not an accepted blend in commercial and trade circles. They further submitted that their entries in Form IV of the records of nylon content in yarn as 13.6% was correct and in the show cause notice, there was no allegation that they had received and used about 80 kgs of nylon tops in excess of those shown and accounted for in the statutory records. The appellants further challenged the imposition of penalty which had not been imposed on M/s. Golden Woollen Mills, Ludhiana who were also charged like wise. The Counsel for the appellants, had on these ground sought for setting aside the order of the Addl. Collector.
5. Shri L.C. Chakraborthy, the learned Departmental Representative supported the order passed by the Addl. Collector and defended the test result and submitted that the laboratory tests were not motivated and the allegation against the laboratory were vague and no person had been named, who had demanded money. Toe appellants had several months ago in the company of several industrialists generally complained about the test results as can be seen in their letter dated 19-1-1983. The test report is signed by the Chief Chemist and it cannot be discredited on flimsy, vague and mere apprehensions. The appellants had been given a sample and if they had any doubt about the test result, they could have sent that sample to a laboratory of their choice and got tested the same. Having failed to do so, they cannot challenge the test result as bad. Sh. Chakraborthy further submitted that the chemical composition as required under Tariff Item 18-E(ii) has to be considered and not as in commercial or trade parlance.
6. The only question that arises for our consideration is as to whether the Addl. Collector was justified in accepting the test reports despite the requests for retesting in another Test House of the appellants choice in view of apprehension expressed by them and as to whether the Addl. Collector was justified in imposing duty on 2122.100 kgs of yarn when total yarn produced in Lot No. IS was 1960 kgs only and 162.1 kgs being waste and also as to whether the Addl. Collector was justified in imposing penalty of Rs. 10,000/-. We find from the reply letter dated 19-1-1983 to the show cause notice, the appellants having expressed apprehension regarding test results in a meeting of industrialists a few months prior to the raid and collection of the samples. The appellants had not specifically pointed out the person who had demanded money nor they had demanded for any investigation in the meeting or later either. Such a vague allegation of demand for money by some person from Test house at Delhi is no allegation against any specific person or the Chief Chemist who has signed the report. As pointed out by the learned Departmental Representative, the Chief Chemist who has signed the report is a responsible person and his credit cannot be challenged so easily and further there is no allegation of demand for money from him and as such the test report is a true result of test of the contents. The test result cannot be assailed on such vague allegations made several months ago in a joint meeting. To set aside the test results, the appellants should show positively the lacunae in the result. The appellants could very well have called the Chief Chemist for cross-examination and sought the procedure adopted for testing and the incorrectness or assailability of the same. They have further failed to get their own sample tested in the Test house of their own choice. The idea in giving them a sample was to get it tested in a Test house of their choice, if they want to dispute the results. The appellants having failed to do so and having failed to show their goods specified to be as per the standards laid down in Tariff Item 18-B(ii), cannot now make a grievance of the test results. The test results on both occasions have been the same which have been obtained from the Test House at New Delhi and we see no reason to discard the same.
7. In the case of Ramalinga Choodambikai Mills Ltd. v. Government of India and Ors. [1984 (15) E.L.T. 407 (Madras)], Madras High Court has held –
“It is true that the petitioner requested the third sample to be tested and that such a request was rejected. But it has to be borne in mind that the first and second samples earlier tested practically showed that the count of yarn manufactured by the petitioner on the date when the sample was taken was more than 33.9 NF that is over and above 40 counts. If the test of the two samples showed varying results, then it will be necessary to test the third sample. When the testing of the two samples led to identically the same result the third respondent very rightly thought that the retest of the third sample was quite unnecessary. Neither before us nor before the authorities, the petitioner was able to question the test reports of the two samples tested already. Under these circumstances, it is not possible to accept the petitioner’s contention that all the samples should be tested before action is taken for levying additional duty in this case.”
8. The same is the view taken by this Tribunal in the case of Eagle Mineral Products v. Collector of Central Excise reported in 1988 (38) E.L.T. 315 (Tribunal) at para 8, it is observed –
“Samples were retested by the Chief Chemist at the request of the appellants. They are therefore, bound by the results of retest. Having requested for retest, they cannot now take the plea that the result of the retest of the sample cannot be reliedupon. This plea of the appellants is, therefore, rejected.”
The appellants should satisfy the requirement of composition as laid down in Tariff Item 18-B(ii). The other contentions raised by the appellants on commercial and trade or similar such grounds cannot be considered by us, hence we reject the other grounds of appeal also. However, we find strength in the arguments of the Counsel for appellants that the learned Collector had erred in levying duty on 2122.100 kgs. of yarn when the total yarn produced in lot was 1960 kgs only reiving on a decision of this Tribunal in Standard Woollen Mills v. Collector of Customs, Chandigarh reported in [1987 (28) E.L.T. 417]. To this extent the appellants succeed and the duty charged being modified to this extent only. The penalty imposed is excessive and the same is reduced to Rs. 1000/-. With this modification, the appeal is dismissed.
9. The Cross-objection does not survive and the same is also dismissed.
D.M. Vasavada, Member (J)
10. I have gone through order dicated by learned brother, Sh. S.L. Peeran and with utmost respect, I have to state that I am unable to agree with the same. In the paper book, Annexure ‘C is a letter dated 19-1-1983 addressed to the jurisdictional Assistant Collector by the appellant wherein paras 3 and 4 are read as under:
“We also draw your attention towards the meeting held with your goodself a few months ago with some of the industrialists who manufacture such a blend of Yarn (i.e. Yarn containing wool 70% Nylon 14% and Viscose 16%), and in this meeting it was pointed out to your goodself that we are getting threatenings from the office of Chief Chemical Examiner, Delhi that if we don’t pay, the samples are bound to be failed. In the meeting, it was also requested that in future our samples should be sent to some other laboratories; because if the Nylon is upto 16.66% the duty is nil if Nylon comes a little above this the duty is Rs. 22.50 P. per kg. and this marginal thing has made the blackmailing and easy and convenient job.”
“Now our sample has been knowingly and deliberately failed. We request your goodself to send our Second or Third sealed samples which are lying with your Deptt. for retesting. But it should never be sent to the Chief Chemical Examiner, New Delhi in any case, we are not bound by his report any more. You are requested to please send our samples to Punjab Test House, Ludhiana which is a Govt. recognised Test House, all supplies made to Central Govt. and State Govts., are being tested here.”
11. In my opinion, the question whether what has been stated above, could be true or not would not arise because Assistant Collector concerned did see some point in it and did accede to the request of the appellant and did obtain another report. Now, as can be seen from the above excerpt, the appellant had specifically requested that the sample should not be sent for retesting to the office of Chief Chemical Examiner, Delhi, but the Assistant Collector did exactly that. Moreover, it appears from the letter dated 21-10-1983 (Annexure ‘G’) that what was examined by the Chief Chemical Examiner at New Delhi was not the second or third sample but remnant of the first sample. From test memo, copy of which is produced at Annexure ‘A’, under which the first sample was sent to the Chief Chemical Examiner at New Delhi, it can be seen that sealed sample consisting of four containers was sent to that office by the factory Inspector and it is not anywhere in the record that the remnant sample was sent back to the Deptt. So it would appear that remnant sample was lying at the office of the Chemical Examiner, New Delhi. So asking the same authority, to examine the same sample, would be nothing, but mockery of justice.
12. Assuming that the second test was carried out by the Chief Chemical Examiner (though there is nothing on record to substantiate this fact) and accepting the contention of the Ld. D.R. that such higher authority would not manipulate things and that his bona fides should not be doubted then also what he tested was the remnant sample which was lying in that office. In that case, it would not be proper. When jurisdictional Assistant Collector acceded to the request of the appellant for retest, it was expected of him to play fair and to send another sample to another laboratory. It is true that the appellant had requested that the sample be sent to such test house at Ludhiana but then it would not be obligatory on the part of the Assistant Collector to send it to that laboratory. He could have selected any other laboratory. I do not suggest, for a moment, that test reports prepared by the office of the Chief Chemical Examiner at New Delhi were in fact manipulated or that the sample sent to them was intentionally changed or adulterated. But it is cardinal principle of justice that justice should not only be done but it should appear to have been done.
13. The Govt. Deptt. must be quite fair in its dealings and should not behave in a manner which would cause slightest doubt in the minds of persons dealing with it.
14. The ratio of Ramalinga Choodambikal Mills Ltd. v. Government of India and Ors. (supra) could not apply because in that case two samples were tested and there was no allegation against the office of the Chemical Examiner. Similarly, ratio of Eagle Mineral Products v. Collector of Central Excise (supra) would also not apply because therein also retest was carried out by the Chief Chemist at the request of the appellant therein and has held therein, the appellant was bound by the results of the test. Therein also there was no challenge against bona fides of the office of the Chemical Examiner.
15. Here, the jurisdictional Collector did not behave in a proper manner and appellant had reasons to make grievance. So, the proper course would be to remand the case back to the adjudicating officer with the direction to get the second sample tested in some other laboratory and on basis of that report, to readjudicate the matter. It is true that the appellant could have got a sample in their possession, retested, in some other laboratory and could have confronted the adjudicating authority with the said report. But that would only have made case of the appellant arguable but the adjudicating authority would not have been bound by such report. Moreover, it was not a legal duty of the appellant to do so. So, their case cannot be faulted on that ground. It is possible that the second or third samples might not be available either with the department or with the assessee and remand might not serve any purpose. But then for sake of expediency demand of justice cannot be over looked whatever might be the consequences. So, I would propose the following order :
“The matter be remanded to the jurisdictional authority for de novo adjudication after, obtaining test report of the second or third sample.”
FINAL ORDER
In view of the majority opinion, the appeal and the “Cross-Objection” are disposed of in terms of paras 8 and 9 of the said opinion.