Reprocessed goods under Rule 173H cannot be treated as clandestine removal without contrary evidence or supporting records.

Clearances of springs were treated as reprocessed goods returned by customers and accounted under Rule 173H of the Central Excise Rules, 1944, where the assessee showed receipt of defective goods in the Form V register and their subsequent clearance under proper invoices. The allegation of clandestine removal failed because the department produced no contrary material such as seized records, evidence of excess consumption, shortages, or customer statements disproving reworking. A finding based only on presumptions and the absence of a private register was insufficient to override the documentary evidence, so the demand and penalties were not sustainable.

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Issues: Whether the clearances made by the assessee were reprocessed/reworked goods returned by customers and accounted under Rule 173H of the Central Excise Rules, 1944, or whether they amounted to clandestine removal of fresh goods without payment of duty.

Analysis: The evidence on record showed receipt of defective springs from customers, entry of such goods in the Form V register maintained under Rule 173H, and clearance of the same after reprocessing under proper invoices. The rejection of this evidence was found unsustainable, especially when no contrary material was seized or produced by the department to establish clandestine manufacture, excess consumption of inputs, shortages, or customer statements showing non-receipt of reworked goods. The finding of clandestine removal rested only on presumptions and on the absence of a private register, which by itself was insufficient to displace the documentary evidence produced by the assessee.

Conclusion: The clearances were held to be reworked/reprocessed goods returned by customers and not clandestine removal of fresh springs; the demand and penalties could not be sustained.

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