2025 (6) TMI 1024 - AT - Customs

Seeking re-testing and re-sampling of goods - re-testing/re-sampling sought within the stipulated period normally within 10 days of the receipt of the report or not - CBIC Circular No. 30/2017 dated 18th July 2017 - HELD THAT - As per the decision of Tata Chemicals Ltd. 2015 (5) TMI 557 - SUPREME COURT the sampling has to be done as per the prescribed methodology to allow the sample to be tested in the proper environment. This is the crux of the decision of Tata Chemicals Ltd. as well all the decisions quoted by the learned Advocate. Since the consignment is live and the goods are available the re-drawl and re-testing as has been sought within the stipulated period and can be conveniently considered. It is in the interest of the department also that the sampling is done as per the prescribed procedure by re-drawing the sample under proper panchnama and sample send to re-testing to the same lab i.e. CRCL Vadodara rather at this stage than regretting later. Therefore the ends of justice as well as the requirements for the departmental sampling shall be met by acceeding to the request of the appellant. Request therefore is allowed with direction to the authorities to draw sample and re- test the same with CRCL Vadodara after following prescribed procedure in para 3, 4 5 of IS standard 1447 (Part 1) of 2000 to the extent applicable. Conclusion - The appellant s request for re-sampling and re-testing was validly made within the stipulated period and must be allowed. Appeal allowed.

Summary

The core legal issues considered by the Appellate Tribunal in this case are:

1. Whether the appellant has a right to seek re-testing and re-sampling of goods within the stipulated period as per applicable regulations and circulars.

2. Whether the initial sampling and testing procedure complied with the prescribed legal and technical standards, specifically the Indian Standard IS 436 for coal sampling and IS 1447 (Part 1):2000 for petroleum and its products.

3. Whether the presence or absence of the appellant's representative at the time of sampling can estop the appellant from challenging the validity of the test report.

4. Whether the test report based on samples drawn in a manner contrary to law and prescribed standards can be relied upon by the Customs authorities.

5. The applicability of judicial precedents relating to sampling procedures, re-testing rights, and the validity of test reports in customs and excise matters.

Issue-wise Detailed Analysis:

1. Right to Re-testing and Re-sampling Within Stipulated Period

The appellant contended that re-testing and re-sampling is a statutory right, subject only to the condition that the request is made within the prescribed period, usually 10 days from receipt of the test report, as per CBIC Circular No. 30/2017 dated 18th July 2017. The respondent conceded that the request for re-testing and re-sampling was indeed made within this stipulated timeframe.

The Tribunal accepted this submission and noted that since the request was timely, the appellant was entitled to have the samples re-drawn and re-tested. This right is fundamental to ensuring fairness and accuracy in customs valuation and classification disputes, and the Tribunal emphasized that procedural timelines must be respected.

2. Compliance with Prescribed Sampling Methodology (IS 436 and IS 1447)

The appellant challenged the validity of the original sampling on the ground that it was not conducted in accordance with the Indian Standard IS 436, which governs sampling of coal, and IS 1447 (Part 1):2000, which prescribes detailed procedures and apparatus for sampling petroleum and petroleum products.

The Tribunal extensively examined the provisions of IS 436, which mandates dividing the entire quantity into sub-lots and drawing gross samples from each sub-lot, specifying minimum sample weights and detailed procedures for sampling during loading or unloading of ships. The Tribunal reproduced relevant clauses and tables from IS 436, highlighting that the samples in the present case were drawn contrary to these express provisions.

Similarly, IS 1447 (Part 1):2000 was analyzed in detail. The Tribunal noted the extensive prescriptions regarding apparatus, container types, cleaning procedures, sampling cages, precautions, handling, labelling, and shipping of samples. The standards emphasize the necessity of representative sampling, prevention of contamination, and maintaining sample integrity.

On the facts, the Tribunal found that the original sampling did not comply with these standards, thereby undermining the reliability and legality of the test report.

3. Presence of Appellant's Representative and Estoppel

The Customs authorities relied on the fact that the appellant's representative was present during sampling and did not raise any objection, arguing that this estopped the appellant from challenging the test report.

The Tribunal rejected this argument, relying on the Supreme Court decision in Tata Chemicals Ltd. v. Commissioner of Customs (Preventive), Jamnagar, which held that even if samples were drawn contrary to law, the importer cannot be estopped from challenging the test report merely because their representative was present and did not object. The Tribunal emphasized that no representative of the appellant was actually present at the time of sampling, as the alleged representative disavowed representation and presence.

More importantly, the Tribunal underscored the principle that "there can be no estoppel against law." If the law prescribes a particular procedure for sampling, failure to follow it renders the sample and consequent test report legally non-existent. The Customs authorities cannot absolve themselves from compliance with the law based on the acts or omissions of an assessee or their representative.

4. Validity and Reliance on Test Reports Based on Improper Sampling

The Tribunal held that test reports based on samples drawn contrary to the prescribed legal and technical standards cannot be relied upon by Customs authorities. The sampling procedure is foundational to the validity of any test result; if the sample is not representative or is contaminated, the test report is vitiated.

The Tribunal referred to other judicial precedents, including decisions from the Punjab & Haryana High Court and the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Mumbai, which supported the proposition that improper sampling or use of unprescribed apparatus vitiates the test report and justifies re-sampling and re-testing.

5. Application of Law to Facts and Treatment of Competing Arguments

The Tribunal carefully balanced the submissions of both parties. While the respondent Customs authorities argued that the presence of the appellant's representative and absence of immediate objection validated the sampling, the Tribunal rejected this in light of the legal principle that procedural compliance cannot be waived by estoppel.

The Tribunal also considered the fact that the goods were still available ("live consignment"), making it feasible and just to allow re-sampling and re-testing. This approach was seen as serving the ends of justice and departmental interests, avoiding future disputes or litigation over the validity of the test report.

The Tribunal directed that re-sampling be conducted strictly in accordance with the detailed procedures prescribed under IS 1447 (Part 1):2000, to the extent applicable, and that the samples be sent to the same laboratory (CRCL, Vadodara) for re-testing.

Significant Holdings:

"The Tribunal's judgment has proceeded on the basis that even though the samples were drawn contrary to law, the appellants would be estopped because their representative was present when the samples were drawn and they did not object immediately. This is a completely perverse finding both on fact and law."

"In law equally the Tribunal ought to have realized that there can be no estoppel against law. If the law requires that something be done in a particular manner, it must be done in that manner, and if not done in that manner has no existence in the eye of law at all."

"Since the consignment is live and the goods are available, the re-drawl and re-testing as has been sought within the stipulated period and can be conveniently considered. It is in the interest of the department also that the sampling is done as per the prescribed procedure by re-drawing the sample under proper panchnama and sample sent to re-testing to the same lab i.e. CRCL, Vadodara, rather at this stage, than regretting later."

Core principles established include:

• The right to seek re-testing and re-sampling within prescribed timelines is a fundamental procedural safeguard.
• Sampling must strictly comply with prescribed legal and technical standards (IS 436 for coal, IS 1447 for petroleum products) to ensure validity of test reports.
• Presence or absence of an assessee's representative during sampling does not estop the assessee from challenging illegal sampling procedures.
• Illegal sampling procedures render test reports void ab initio and cannot be validated by estoppel or acquiescence.
• Re-sampling and re-testing should be allowed when goods are available and procedural non-compliance is established, to serve justice and departmental interests.

Final determinations:

• The appellant's request for re-sampling and re-testing was validly made within the stipulated period and must be allowed.
• The original sampling was not conducted in accordance with the prescribed Indian Standards and was therefore illegal.
• The appellant was not estopped from challenging the test report despite alleged presence of a representative during sampling.
• The Customs authorities are directed to re-draw samples following the procedures prescribed in IS 1447 (Part 1):2000 and send them for re-testing to the same laboratory.
• The appeal was allowed accordingly, setting aside the rejection of the re-testing request by the Commissioner.