TMI Blog2007 (9) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... earings, elbows, clips, blades, valves, catches, studs, bolts, tyres, corks, brushes etc. all of which were bought out items As per their say it was their practice that all spares and components whether manufactured 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if they were accompanied by duty paying documents, they were accounted for in the RG 23A Part I register and correspondingly credit was availed of in RG 23A Part II. The small bought out spare parts meant 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 fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 231,644 Less: Bought out spare parts accounted in RG-1 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 ____________ Quantity which could not be accounted for 83 8. In view of above it was submitted that there was no shortage and accordingly no duty was demandable The appellant also took us through the various sales invoices and challans, RT-12 returns etc to show that after 30-6-1988 the bought out items were not entered in the RG-1 register and that excise duty was paid only on the value of the manufactured items in each invoice and not on the bought out items as against the earlier practice of paying duty on all spares sold by them whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r can clandestine removal be assumed or presumed as held by the Patheja Forging Auto Parts Mfrs. Ltd. v. C.C.E. - 2001 (127) E.LT. 513 (T) and Premier Packaging v. C.C.E. - 1986. (26) E.L.T. 333 (T).it was also submitted that department has not produced any input output ratio to show that the appellants could have manufactured such large quantities of spares; They do not have any manufacturing facilities to manufacture such small spares nor as the department brought on record any machines which could have produced the spare now found short. 9. Appellants also alleged violation of principle of natural justice in as much as they were not allowed cross examination of the Superintendent of Central Excise, Mr. Gum, who according to them had specifically instructed them to stop accounting of bought out small items in RG-1 register and cross examination of other Superintendent and Inspector to bring the practice followed by them. 10. Without admitting the clandestine removal, learned advocate disputed the valuation adopted by the Commissioner. It was submitted that the Commissioner has taken an average price of manufactured goods during the period March 1993 to August 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 998 (100) E.L.T. 8 (S.C.). In the present case, the department was fully aware that ever since the factory started, they have been purchasing various spare parts, which they have been recording in RG-1 register and have been clearing the same on payment of duty till June 1988 when the Superintendent of Central Excise, one Mr. Gum, informed them that the appellants should stop the practice of entering bought out spares in the RG-1 register and clear the same on payment of duty. The appellants however fairly admitted that this direction of Mr. Gum was oral and they have no documentary evidence to establish the same. 13. The appellants do not dispute duty liability amounting to Rs. 45,015.95 in respect of 1395 cutting tools found short at the time of stock taking nor do their dispute the confiscation of 153 Nos. pneumatic tools which were 14 Learned D R reiterates the finding of the Commissioner and submits that it is incorrect to say that the appellants have not debited the stock of bought out items from the RG-1 register in June 1988 as is being contended by them and in fact only manufactured spares have been entered in RG-1 register as otherwise they would have sought permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1 register and made no debit entries thereafter till the date of seizure, in spite of the fact that the items were issued either for manufacture or for sale The appellants have placed a heavy reliance on the computerised statement which according to them reflected such categorywise break up of the spare part Here we find that firstly as observed by the Commissioner even computerised record were not maintained correctly as 12954 Nos. of spares were not fed in the computer The appellants' plea that these spares were old and non moving does not mean that the items are not to bee reflected in the computerised record and in the inventory prepared by the appellants as the balance sheet neither show them as a obsolete items or as a written off spares We also note that cardex which were prepared separately for manufactured items and bought out items have been destroyed and are not available. We therefore called for the computerised record from June 1988 onwards till date along with the RG-1 figures to verify that no debit entries were made in RG4 register in respect of bought out items which were in balance in June 1988 in RG-1 register. But the appellants could not produce either the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of no consequence as duty is assessed on the goods which are reflected in the RT-12 returns. On the other hand RT-12 returns are based on -RG-1 register and if the stock was reflected in the RG-1 register, the RT 12 returns must 'have a reflected the same figure and the appellants have also not been able to produce the RT-12 to show that the opening balance and closing balance of manufactured goods in the RT-12 returns was different than one shown in the RG-1 register. 17. In view of above, we hold that the duty has been correctly demanded. 18. As regards the valuation since the goods have been considered as manufactured goods we do not find arty fault in the finding by taking an average price-of the manufactured items 19. As regards the rate of duty since the appellant have not maintained categorywise record of spares, it cannot be ascertained as which spares were chargeable to different rate of duty and in the absence of the same the highest duty applicable to spares has to be applied However, we do note that the Commissioner he 20% which was applicable to finished product, whereas the spares were chargeable to duty from 10%-to 15% and for this purpose the matter is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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