Judgment:
1. In this case, the question involved is how to apply the tolerance allowed with regard to test results. On this depends the further question of classification of the goods in dispute and the liability of the respondents to the duty that the Revenue considers is due from them. On 26-3-1981, the respondents cleared a quantity of shirting cloth declaring it to be man-made fabrics (Item 22 of the Central Excise Tariff Schedule as in force at the material time) whereas, on test, it was found to consist of 51.3% of wool fibres and 48.7% of non-cellulosic fibres. The Assistant Collector, therefore, held that the fabric was woollen fabric falling under Item No. 21 of the Schedule in view of the predominance of wool fibre and demanded differential duty amounting to Rs. 4,083.73. In appeal, the Assistant Collector's order was set aside on the ground that, in accordance with the Central Board of Excise and Custom's letter F.No. 261/19/12/76-CX. 8, dated 25-2-77 allowing 2.5% tolerance in mixed fabrics, the respondents' claim was well-founded. He also held that the demand notice having been issued (on 24-3-1982) after the limitation of 6 months, it was time-barred. The Colle- ctor of Central Excise, Chandigarh is now in appeal before the Tribunal against this order.
2. We have heard Shri Jayanarayan Nair, DR, for the appellant-Collector and Shri C.L Maheshwari, Law Officer and Attorney of the respondents.
3. The ground put forth in the appeal is that even after allowing the tolerance of 2.5% as per Board's letter, the predominant fibre in the fabric remains wool. The following is the working shown in the appeal:_______________________________________________________________________________ % of fibre % of fibre as Tolerance @ % of fibre after allowing declared in found on test 21/2% tolerance in favour of part the C/List_______________________________________________________________________________Wool 49% 51.3% 1.28 50.02Viscose 51% 48.7% 1.22 49.92_______________________________________________________________________________ And, on the above basis, it is contended that the respondents had mis-stated the composition of the fabrics with intent to evade duty and, therefore, the extended period of limitation in Section 11A of the Central Excises and Salt Act would apply.
4. The Central Board of Excise and Customs in its Circular F.No.261/19/12/76-CX. 8, dated 25-2-1977 has laid down for the guidance of Collectors the method of applying the tolerance factor to results of tests. The circular says that for determining the percentage of rayon or artificial silk contents of mixed fabrics in tests an allowance of 2.5% may be given in favour of the manufacturer on account of unevenness in the deniar of the rayon or other yarns used in making up the fabrics and subsequent process of the woven fabrics. When the Board itself has laid down that the tolerance should be in favour of the assessee we do not see why the lower authority (Assistant Collector) has not extended its benefit to the assessee though it is no doubt true that Board's circulars are not binding on quasi-judicial authorities.
It is well known that test results are not necessarily always very accurate and that this is so in the case of determination of the art silk or rayon content in man-made fabrics and that, therefore, a tolerance factor of 2.5% has to be applied to the results of tests has been recognised by the Board in consultation with the Chief Chemist of the Central Revenues Control Laboratory. Applying the tolerance factor, the composition of the subject fabrics will work out to :- 5. Apart from the above, there is no reason on record as to why the demand notice was not issued within the normal limitation of 6 months.
(The goods were cleared on 26-3-1981 and the notice of demand on 24-3-1982). When the Board itself has considered that there is a possibility of error in the results arrived on test of mixed fabrics, there should be some tangible evidence, to be adduced by the Department, that the assessee's declaration of the composition was a deliberate mis-declaration with intent to evade a higher incidence of duty. No such evidence is on record.