1987 (7) TMI 284 - AT - Customs

Issues Involved:
1. Duty demand on destroyed and unaccounted watch components.
2. Duty demand on assembly losses.
3. Duty demand on clandestine removals to ancillary units.
4. Confiscation of components and vehicle.
5. Seizure of excess components.
6. Non-maintenance of raw material account and non-submission of RT5 returns.
7. Imposition of personal penalties and fines.

Detailed Analysis:

1. Duty Demand on Destroyed and Unaccounted Watch Components:
The adjudication order demanded Rs. 20,22,639.67 for watch components destroyed as rejects and Rs. 1,41,766.40 for components lost in assembly. The appellants argued that their internal accounting was detailed and previously accepted by the department for other components. They contended that the department presumed all rejected components were destroyed without considering rework and reissue. The Tribunal found merit in the appellants' internal records but noted the lapse in not following prescribed destruction procedures. Consequently, while the demand for duty was not upheld, a suitable penalty was justified for procedural lapses.

2. Duty Demand on Assembly Losses:
The demand for Rs. 1,41,766.40 on components lost in assembly was addressed similarly to the destroyed components. The Tribunal noted the appellants' detailed internal accounting and the lack of evidence for clandestine removal. The procedural lapse in not following destruction protocols was acknowledged, warranting a penalty but not the duty demand.

3. Duty Demand on Clandestine Removals to Ancillary Units:
The demand for Rs. 48,99,812.05 was based on differences in reconciliation statements of ancillary units and receipts under Gate Passes. The appellants argued that both indigenous and imported components were supplied under dispatch vouchers with distinct stock numbers. The Tribunal found that the Collector did not adequately consider the appellants' submissions and records. Therefore, the demand was set aside and remanded for re-examination by the Collector, directing a fresh adjudication with proper consideration of the appellants' records.

4. Confiscation of Components and Vehicle:
The confiscation of components from an Ambassador car and the car itself was upheld. The appellants' explanation that the components were imported and permitted for movement was not immediately substantiated. The Tribunal found no documents covering the movement, justifying the confiscation.

5. Seizure of Excess Components:
The excess components seized from the ancillary units were rightly confiscated due to concealment and lack of denial of excess by the appellants. However, the Tribunal found the seizure of the entire stock based on detected excesses harsh and unjustified, given the appellants' maintained records. The order confiscating components valued at Rs. 40,83,426.61 and Rs. 39,42,612.22 and the corresponding duty demand was set aside.

6. Non-Maintenance of Raw Material Account and Non-Submission of RT5 Returns:
The appellants admitted to not maintaining the raw material account in form IV and not submitting RT5 returns. The Tribunal found this lapse justified a penalty, as the appellants failed to comply despite instructions from the jurisdictional Superintendent.

7. Imposition of Personal Penalties and Fines:
The Tribunal reduced the personal penalty on HMT Watch Factory to Rs. 50,000 and on Bharatha Matha Watch Assembly Unit and Gayathri Women Welfare Association to Rs. 5,000 each, considering the nature of the offence. The fines in lieu of confiscation were deemed reasonable and upheld. The case related to the demand for Rs. 48,99,812.05 was remanded for fresh adjudication.

The judgment reflects a detailed consideration of procedural lapses and the necessity for proper record maintenance while recognizing the appellants' internal systems and previous departmental practices.

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