Eduyos, chapter two, mishnah two. This mishnah actually deals with a subject from Maseches Zevachim: the law of the hides of offerings, and in particular of offerings in which a disqualification was discovered.
The general rule regarding the hides of offerings:
Kodshei kodashim (an olah, a chatas and an asham) - after the offering is brought, the hide is given to the kohanim serving in the Beis HaMikdash that week.
Kodashim kalim (such as shelamim) - the hide of the animal goes back to the owner.
A disqualified offering - an animal that was not offered properly, or whose slaughter was not performed according to halachah, is burned in its entirety: flesh and hide together.
The question of the mishnah:
The animal was slaughtered, it was skinned - that is, the hide was separated from the flesh - and the blood was thrown as required, and everything appeared to be proceeding properly. While cutting up the flesh it was discovered that the animal had been a tereifah. Retroactively, then, it turns out that the offering was not valid, and the flesh will have to be burned. The question is, since the matter came to light only after the hide had already been separated from the flesh: may the kohanim (in kodshei kodashim) or the owners keep the hide, or must the hide too go out to be burned along with the flesh?
The testimony of Rabbi Chanina, the deputy Kohen Gadol:
This is the second of the four testimonies given by Rabbi Chanina, the deputy Kohen Gadol: "Miyamai lo ra'isi or yotzei l'veis hasereifah" - in all my days of service in the Beis HaMikdash I never saw the hide of an animal by itself, after it had been separated from the flesh, going out to the place of burning, where the flesh of disqualified offerings was burned. The flesh would generally go out with its hide still attached, but a hide on its own, without flesh attached to it, he never saw.
The meaning of this is as follows: from time to time it certainly turned out that offerings were tereifos, and the matter was discovered only after the hide had been removed. Had the law been that the hide is burned, Rabbi Chanina would have seen hides being burned separately. From the fact that he never saw this, it is proven that the law is that the hides remain permitted for use, even though the flesh is disqualified and must be burned.
Rabbi Akiva's derivation - a blemished bechor:
Rabbi Akiva learned from here even more than this, that a similar law applies to a bechor animal. A bechor is the first male offspring of a cow, goat or sheep, and it is given to a kohen, who offers it as a bechor offering and keeps the flesh for himself. If the bechor developed a blemish while alive, a blemish that disqualifies it from being offered, a residue of sanctity remains in it: one may not work with it and one may not shear its wool, but it may be eaten as chullin. Once it has been properly slaughtered, the flesh is permitted, and so is the hide.
The parallel is clear: in an ordinary offering, the throwing of the blood on the mizbe'ach is what permits the hide, even though at that moment they did not know that the animal was a tereifah; and in a bechor, the slaughter is what permits the flesh and the hide. What, then, would the law be if, after a blemished bechor was slaughtered and skinned, the flesh was found to be tereifah and forbidden to eat - what is the status of the hide?
In Rabbi Akiva's view, the same principle applies here: what determines the matter is not the existence of the disqualification itself, but the moment it is discovered. And since the matter came to light only after the hide had been separated from the flesh, even though the flesh requires burial, the hide remains permitted. In the language of the mishnah: "Amar Rabbi Akiva: midvarav lamadnu, shehamafshit es habechor v'nimtza tereifah - sheye'osu hakohanim b'oro" - from the words of Rabbi Chanina, the deputy Kohen Gadol, we learn that if one slaughters a bechor and skins it, and after the skinning it is found to be a tereifah so that its flesh is not fit, the kohanim may derive benefit from its hide ("sheye'osu" from the word for benefit).
The view of the Sages:
The Sages disagree and rule: "Lo ra'inu eino ra'ayah" - we did not see it is not proof. The fact that Rabbi Chanina, the deputy Kohen Gadol, never saw a hide burned without flesh attached to it does not prove that it never happened. First, it may well have happened many times without his taking note of it. Second, even if it truly never happened, the reason may simply be that no tereifah was found in the Beis Hamikdash during the time he served on his watch. In short: from the fact that he did not see it, one can conclude neither that the thing never occurred nor what the law is, and there is no basis for such an inference.
Therefore: "Ela yotzei l'veis hasereifah" - rather, it goes out to the place of burning. If the animal was found to be a tereifah, then even though the hide has already been separated from the flesh, the hide goes out to be burned just like the flesh, for they are one entity, and it is forbidden to derive benefit from it. Consequently, we no longer have the comparison from which Rabbi Akiva derived that the hide of a blemished firstborn is also permitted.
In summary: the Tannaim disagreed about a hide that was separated from the flesh and only afterward the animal was discovered to be a tereifah. Rabbi Chanina, the deputy Kohen Gadol, testified that he never saw a hide alone go out to the place of burning, and Rabbi Akiva extended this even to a blemished firstborn found to be a tereifah, that the kohanim may derive benefit from its hide. The Sages rejected the proof, ruling "we did not see it is not proof," and in their view the hide goes out to the place of burning together with the flesh - and this is the halachah.
It is worth noting that the practical halachah here is somewhat complex, since there are variant readings in the text of the Mishnah. Therefore, in practice one should consult one's local rabbi.