TaxTMI 
TaxTMI 
2007 (9) TMI 158
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....anufactured by them or bought out from the market were entered in RG-1 register and were cleared either for use within the factory or sold as spares in the local market. When these items were sold as spares without using them in the manufacture of their final product, they were again paying duty on the same even though they were bought out items. This practice continued upto 30th June 1988 when they realized that they were not required to pay duty on the bought out items and thereafter they stopped entering bought out items in the RG-1 register. However it is their claim that the bought out items which had already been recorded in the RG-1 register prior to 30-6-1988 were thereafter removed from the factory under their private challan without payment of duty but they inadvertently omitted to reduce the quantity of these small bought out spares from the RG-1 register. Hence the unreduced quantity of bought out spares amounting to 52,545 items, though removed from their fact6ry, was being carried forward in the RG-1 register from that date onwards. 2 The unit was visited by the Central Excise officers on 12-8-1993, 13-8-1993 and 21-8-1993 wherein they found an excess of 153 pneuma....
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....for re-sale were accounted for in the RG-1 register without any corresponding entry in the RG 23A registers and were cleared on preparation of GP 1, and no credit was taken. All the items manufactured within the factory were being sent from the manufacturing department to the appellants' excise department under the 'C' challans mentioned above. Based on the said 'C' challans, the appellants' excise department accounted for manufactured items in the RG-1 register. All the small spares, which were bought out items, were first received in the stores department which prepared Material Inward Receipts (MIRs) for such bought out items 'the said bought out small items were then transferred to the excise department under 'C' challans. All the 'C' challans contained the stock code number of each small spare. These were then accounted by the excise department in the RG-1 register in a consolidated manner even though they were bought out items and not manufactured items. In view of the fact that the variety and quantity of these small items was too large (3500 varieties) to maintain a separate account and the duty on goods falling under tariff item 68 was not much it was easier to account for....
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.... 52,545 The actual quantity of manufactured Spares in RG-1 179,099 out of total stock as on 30-6-1988. Plus: Production of manufactured spares as per RG-1 443,722 from July 1988 to 10-8-1993 Total quantity of manufactured spares 622,821 Less : Clearance under GP1 of manufactured Items from 571,224 ....
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.... in the computer records Though the difference in stock has been admitted by the officers of the company, which difference was duly explained, none of them have ever stated that the goods were clandestinely removed. On the other hand affidavit were filed as early as 17-8-1993 stating that the appellants have discovered their mistake, namely that they have recorded bought out items in the RG-I register upto 30-6-1988 and thereafter cleared these bought out items without reducing the balance in the RG-1 register. No evidence has been produced by the department of any clandestine removal and clandestine removal has been assumed only by reference to shortage. He referred to the decision of Tribunal the case of Saraya Steel Ltd. v. C.C.E. -1998(98) E.L.T. 787 (T) and Beco Industries Ltd. v. C.C.E. - 2000 (121) E.L.T. 650 (T) wherein it has been held that the clandestine removal is to be proved by the department to the hilt and cannot be based on surmises, conjectures. It has to be proved beyond doubt by production of affirmative evidence A mere difference between the balance in the RG-1 register and the quantity physically ascertained does not establish clandestine removal nor can cland....
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....at were found short and the average price for these 52545 spares came to Rs. 48.52 only and if the same is applied the duty will further come down to Rs.5,11,410.50 at the rate of 20%. It was further submitted that the rate of duty of 20% was wrong as this was the rate applicable to final product namely pneumatic tools whereas the duty in respect of spares was between 10% and 15%. 11. As regards interest it was submitted that the Section 11AB was introduced on 28-9-1996. It has no retrospective operation and the section cannot be made applicable for duty allegedly payable in 1993. Further no penalty can be imposed as they never have any intention to evade duty and in fact no duty has been evaded by them. None of the officers have in their statements made any admission whatsoever regarding clandestine removal of goods and therefore no penalty can be imposed on the officers. 12. On limitation it was submitted that once the department was fully aware of full facts, they cannot invoke the longer period of limitation as held in Nizam Sugar Factory Ltd. v. C.C.E. - 2006 (197) E.L.T. 465 (S.C.) and C.C.E. v. Malleable Iron & Steel Castings Ltd. - 1998 (100) E.L.T. 8 (S.C.). In the p....
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....lance sheet and since they have not carried out any such correction it means that both the RG-1 stock and the balance sheet stock was one and the same and the shortages detected was that of manufactured items only 15 As regards valuation it was submitted that once the shortages pertain to manufactured items only, the question of taking average price of bought out items does not arise 16. We have considered the submissions from both sides. We are satisfied after going through the records namely 'C' challans, purchase invoice, Material Inward Receipts, sales invoice and the stock code numbers mentioned therein that there was a practice with the appellants to enter bought out items also as production in RG-1 register and that this practice was discontinued in June 1988 when the bought out items were not being entered in RG-1 register and in respect of trading activity duty was being paid only m respect of manufactured items and not bought out items However the moot point is whether the appellants in spite of having discontinued the practice in June 1988, still carried on the balance of bought out items lying with them in June 1988 in the RG-1 register and made no debit entries t....
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....ufactured and bought out items in the RG-1 register. We further notice that the so called advice of Shri Gum was only oral and not in writing. Since he was not a relied upon witness, his cross examination could not have been asked for and if the appellants so wanted, they could have produced him in their defence. In view of this it has to be held that whatever shortage was there in the RG-1 register, was in respect of manufactured items as after June 1988 appellants were entering only manufactured items in RG-1 register and not the bought out items. In the absence of any acceptable explanation it has to be considered to have been removed clandestinely. The case laws cited by the appellant holding that mere shortage cannot result in assumption of clandestine removed are not relevant as in these cases the plea raised by the appellant explaining the shortages were not adequately dealt with. We have dealt with the plea taken by them regarding shortage and through various means tried to verify the veracity of their contention but on account of non-production/availability of records we could not verify its correctness. Assessment of RT-12 returns are of no consequence as duty is assessed....