Full Judgment
2. The respondents manufacture cotton fabrics and man-made fabrics falling under erstwhile T.I. 19 and 22. They filled Classification List No. 77/85 for man-made fabrics of Sort No. 53423 declaring the contents of fabrics as 67% polyester and 33% cotton. This classification list was approved by the Assistant Collector Central Excise, Ahmedabad subject to drawal of sample and test result thereof. The test result revealed that the fabrics of Sort No. 53423 contained 100% cotton only instead of 67% polyester and 33% cotton as declared by the party.
Fabrics of this sort were therefore correctly classifiable as cotton fabrics and liable to duty under Notification No. 55/85-C.E. dated 17-3-1985 and not under Notification No. 35/84 dated 1-3-1984.
Consequent upon initiation of the proceedings against the respondents the Assistant Collector confirmed the demand on the fabrics cleared during the period 1-10-1985 to 31-10-1985. The Collector (Appeals) however held that the show cause notice issued on 23-7-1986 for the period from 1-10-1985 to 31-10-1985 was barred by limitation as monthly returns had already been assessed without any objection. The Collector (Appeals) therefore allowed the appeal of the respondent. Hence this Revenue appeal.
3. Arguing for the Revenue Ld. DR submits that the classification list was approved subject to drawal of sample and test result thereof.
Samples were drawn from the specific Sort No. 53423. Test result from the sample of a particular sort would certainly cover the clearances from the particular sort produced and its blend composition declared in the classification list. Purpose of testing sample was to determine the correct blend composition of that particular sort.
... (sic) If the declared composition of that particular sort was not correct then obviously the correct composition as revealed by the chemical test would apply to all the clearances from that specified lot. In support of his contention he relies on the case of Bramec Suri (P) Limited v. Collector of Central Excise, Meerut reported in 1986 (26) E.L.T. 423.
4. None present for the respondent who however through written submissions desired decision on merits. In their written submissions they have stated that the result would not apply to the clearances of fabrics which had already been removed before drawal of the sample.
They cited the case of Standard Woollen Mills v. Collector Central Excise, Chandigarh reported in 1987 (28) E.L.T. 417 and the case of Ram Narayan Mills Ltd, v. Collector Central Excise reported in 1991 (56) E.L.T. 477. The samples were drawn on 14th November, 1985 whereas the goods had already been cleared during the period 1st October, 1985 to 16th October, 1985.
5. We have heard the DR and perused the records of the case. We find that composition blend of a particular sort 53423 was declared as containing 67% polyester and 33% cotton. From the submissions made by the respondents it seems that the goods of this particular sort were cleared during 1st October 1985 to 16th October 1985 and the samples were drawn on 11-11-1985. It is not however not denied that the samples were drawn from this specified sort No 53423 and duty is also paid on this particular sort number. Even in Ramnarayan Mills (supra) the question was the application of test result for all the subsequent period till the next sample was drawn. On the other hand in the case of Bramec Suri (P) Ltd (supra) it was held by the Tribunal that the Department was justified in seeking to apply the result of the test of samples drawn with reference to the production over the entire period for which the demands were raised. There is no claim on the part of the appellants, it was held in that case, that the production varied from time to time with reference to the constituents in the yarn manufactured. The respondents in this case had produced specific sort number and declared its constituents. Samples were taken from this very sort number. Since the test results were at variance with the composition blend declared by the respondents there is no infirmity in applying such test results to the removals effected from that specific sort number only. In view of this we find considerable merit in the Revenue appeal.
6. In regard to limitation, since it was provisional approval the order of the Collector (Appeals) holding the demand as time-barred is not sustainable.
7. In the result, therefore, we allow the Revenue appeal and set aside the impugned order.