Duty demand under Rule 173H fails where fresh goods are not proved and alleged heat-number mismatch is insufficient.

Under Rule 173H of the erstwhile Central Excise Rules, 1944, duty and penalty cannot be sustained merely on an allegation that fresh forgings were cleared as repaired goods unless the department produces reliable evidence to disprove the assessee's explanation. The appellate finding accepted that the invoices did not mention heat numbers and that this discrepancy, by itself, did not establish clandestine clearance of fresh goods. In the absence of material showing that the clearances were not duty-paid rejected forgings sent back for repair or re-conditioning, the demand and penalty were held unsustainable.

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Issues: Whether the demand of duty and penalty could be sustained on the allegation that fresh forgings were cleared in the guise of repaired goods under Rule 173H of the erstwhile Central Excise Rules, 1944.

Analysis: The dispute turned on whether the department had produced material to show that the clearances were of fresh forgings rather than duty-paid rejected forgings sent back after repair or re-conditioning. The finding of fact accepted by the appellate authority was that the invoices did not mention heat numbers and that the department had not successfully disproved the explanation for the subsequent clearances. In the absence of reliable evidence to establish clandestine clearance of fresh goods, the mere discrepancy alleged in heat numbers was held insufficient to deny the benefit of clearance of duty-paid rejected goods under Rule 173H.

Conclusion: The demand of duty and the corresponding penalty were not sustainable, and the assessee succeeded.

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