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TMI Blog2002 (5) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... urers of Ball and Taper bearings. The officers on visit to the appellants Unit, verified the D-3 intimations filed by M/s. ABL and it was found that the factory had filed D-3 No. 42, dt. 28-8-91 but new bearings were despatched subsequently under the pretext of repaired bearings without payment of duty. The private records maintained by the M/s. ABL showed that the rejected bearings which were claimed to have been received for repair as per the above D-3 were in fact not received and were not handed over to the warehouse for reprocessing. Verification of RG 1 Register for the month of 9/91 showed that on 30-9-91 after completing the monthly closing entry, additional entry had been made as quantity sent for re-processing. The quantity stated to have been taken from the RG 1 stock for reprocessing is equal to the quantity said to have been received for reprocessing under D-3 No. 42, dated 28-3-91. It therefore appeared that there was no receipt of defective bearings for repair and in fact they had despatched new bearings subsequently, under the pretext of repaired bearings, without payment of duty to the tune of Rs. 2,86,652.00 under the pretext of repaired bearings, against the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods were received in the factory and finally replacement only was done, the Depot has relied on two things primarily. (i) The letter dated 27-8-91 by Sri N. Sridhar of our Madras office. (ii) Relevant entries with regard to the receipt of rejected materials and issue for reprocessing were not found in the private record. Our reply that the letter of Sridhar was to be interpreted along with the other correspondences in the same matter and not to be read alone and further the entries not found in the private note book can not be relied on while it was very much available in the statutory records, was not accepted by the adjudicating authority. The goods concerned D-3 No. 42, dated 28-8-91 were booked from Delhi and the Delhi Regional office had informed the rejected goods despatched as early as 23-7-91. The chronological events detailed below will prove the appellants claim that the rejected goods were actually received into the factory and after re-processing it was despatched without payment of duty following procedure prescribed under Rule 173H of Central Excise Rules. 23-7-91 :- The message was received by the works from Madras sales office regarding the despa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory record has not been properly reflected in the private register. The proper supervisory control can be exercised only over the entries of the statutory records and it is not possible to go through each and every private record maintained in various sections by various categories of employees. Hence relying on such private registers that too when it did not contain anything contrary to the statutory registers is not valid. As regards the RG1 entry on 30-9-91 the adjudicating authority has come to the conclusion that the bearings removed from the stores stock for reprocessing inside the factory have not been brought back to the stock for nearly 10 months to one year and hence the allegation in the Show cause notice that the fresh goods were replaced against the rejected goods has been confirmed. The appellants wish to state that the practice followed in their unit is, if any RG1 accounted bearings found contain any defects before despatch it will be sent from the store stock for reprocessing by making proper entries in the RG 1 register. The rejected duty paid goods have never been entered in the RG 1 register as the same is accounted in Form V register only. So the reproce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in-original in support of department claim, did not contain anything about the non-rectifiable mistakes. Further the issuing of credit note is not directly concerned with the rectifiable or non-rectifiable nature of the rejected goods. In the statements of the senior managers of the factory, it was clearly brought-out that for maintaining cordial relation with the customers and for the financial adjustments the credit note to be issued in cases of not only rejected goods, but also for their time gap between the receipt and redespatch of the rejected and reprocessed goods. It should not be construed that the mere issue of credit note is confirming the scrapping nature of the rejected goods. Further while demanding Rs. 2,11,140.94 in the show cause notice only seventeen D-3s were quoted relevant to the above demand. But the alleged duty involvement in respect of the referred 17 D-3s was only Rs. 48,076.22 as detailed below as per the worksheet for show cause notice issued by the Asst. Commissioner, Division II, Hasur whereas the duty demanded was Rs. 2,11,140.94. D-3 NO. AND DATE DUTY INVOLVEMENT AS PER THE WORKSHEET TO SHOW CAUSE NOTICE 38/9-8-91 1133.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his order-in-original stated that only the disputed D-3s were shown in the annexure to show cause notice. The appellants insist now that the annexure to the show cause notice contains a list of disputed D-3 for the duty invokment of Rs. 48,076.22 and only the worksheet given by the Asst. Commissioner without quoting any authority from the adjudicating authority contains the list of D-3 for Rs. 2,11,140.95 It is well a settled fact by various decisions of CEGAT and H.C. that what is not alleged in the show cause notice can not be demanded in order-in-original and further the show cause notice along with duty quantification is to be issued only by the adjudicating authority. Here only 17 D-3s invoking a duty of Rs. 48,076.00 were alleged to be of irregular nature in the SCN. Whereas the order-in-original contains a demanded for Rs. 2,11,140.95 against the above 17 D-3s only. As there was no allegation in the Commissioner's notice against 3 D-3s the amount of Rs. 1,63,049.58 relevant to the 3 D-3s can not be demanded. In view of the above submission the appellants submit that - (i) The rectified goods in respect of D-3 42/28-8-91 had actually been received from Delhi and it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpliance of the procedures under Rule 173H in respect of the three D-3s viz. D-3 No. 34, dt. 17-8-92, No. 43, dt. 31-10-92 and No. 54, dt. 8-1-93. In paragraph 27.1 of the impugned order, the Ld. Commissioner refers to D-3 No. 34, dt. 17-8-92 and makes the observation that the GP1 was issued some time between 21-8-91 and 20-12-91. It was pointed to the Commissioner that there was no mention of the date of the original supply of the material in respect of the D-3 No. 43, dt. 31-10-92, though the Commissioner categorically states that the GP1 was issued in February, 1991. A copy of the letter was taken from amongst the seized records and was submitted before the Commissioner and hence it is not understood as to how the Commissioner has again stated that the GP1 was of February, 1991. It is relevant that the Commissioner is not giving a specific date for the said GP. 4. With regard to D-3 No. 54, dt. 8-1-93, a copy of the inter-office letter referred to by the Commissioner was not supplied to the appellant for replying to the SCN and also during the personal hearing and hence a request was made to verify the same before coming to a final conclusion. However, the Commissioner has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od and declaring the said goods as if they have been received within the stipulated time. No duty is demanded on this. However, there is a finding given by the Commissioner that there is procedural violation by the appellants and hence the assessees are liable to penal action. 9. Coming to the first point, we observe that the appellants have taken the ground that the rejected goods were actually received into the factory and after reprocessing they were despatched without payment of duty. According to the appellants the rejected goods were despatched from Delhi under Lorry Receipt (LR) No. 159403 of Patel Roadways. Appellants were not able to show the LR in question under which the goods have been despatched and instead they merely stated that the LR was not traceable. In this connection it is pertinent to point out that if the goods had been despatched, and LR has been lost, it was for the appellants to have come out with supporting evidence. The burden of proving that the LR has been lost undoubtly lies with the appellants which burden has not been discharged. It is not the case of the appellants that they have filed any affidavit or any corroborative material evidence from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the rejected and reprocessed goods. But they have not let in any evidence to show that the credit notes have really represented the rejected and reprocessed goods. Therefore, this plea cannot be countenanced. According to the appellants, the amount of duty that would be payable according to the show cause notice relatable to 17 (seventeen) D-3 numbers is Rs. 48076.00 as worked out by them and brought out in the grounds of appeal, whereas the duty demanded is Rs. 2,11,140.94. We also find force in the contention of the appellants that duty has also been worked out and demanded in respect of the D-3s which were not set out in the show cause notice. It is a well settled proposition of law that the order demanding duty cannot traverse beyond the scope of the show cause notice. In view of the above, we are of the considered opinion that the issue with regard to demand of duty in respect of the second category viz. Demand of duty on alleged removal of goods under the pretext of repaired goods, needs to be recalculated and for that purpose, we remand the matter to the original authority for de novo consideration and re-working out the duty on the goods covered by 17 D-3s covered by th ..... 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