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TMI Blog1987 (7) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... cture and clearances were not accounted in the Statutory R.G.1 Register. The officers came to know that such watch components had been disposed of by being buried in a pit and fresh components were received at the Assembly Section of the Factory in their place. A further aspect found by the officers was that some components were lost in the assembly as assembly losses and fresh components were received to compensate for such losses. The officers also noticed that certain watch components were cleared to their two Assembly Ancillaries of HMT Watch Factory viz. M/s. Gayathri Women's Welfare Association (GWWA) and M/s. Bharatha Matha Watch Assembly Unit (BMWAU) without accounting in R.G. 1 and without payment of Central Excise Duty. On enquiry, it was stated that certain components were sent in excess of the quantity cleared in G.P.1 due to their method of ascertaining the quantity manufactured by weighing in Electronic Balance and that they do not verify the contents in each packet. On 10-4-1984, as a follow up action, the officers visited M/s. Bharatha Matha Watch Assembly Unit and noticed 1000 nos. of watch components "Second-hand N.P." in an Ambassador car belonging to HMT Watch F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) Duty of Rs. 48,99,812.05 (Rupees forty-eight lakhs, ninety-nine thousand, eight hundred and twelve and paise five only) on the watch components valued at Rs. 5,91,77,082.85 .clandestinely cleared to the Appellants' ancillary assembly units GWWA and BMWAU. (iv) Duty of Rs. 794.55 (Rupees seven hundred and ninety-four and paise fifty-five only) on watch components valued at Rs. 7,945.80. (v) Duty of Rs. 4,08,342.66 (Rupees four lakhs, eight thousand and three hundred forty-two and paise sixty-six only) on the goods valued at Rs. 40,83,426.61 cleared by HMT (WF) and seized from the custody of GWWA. (vi) Duty of Rs. 3,94,261.66 (Rupees three lakhs, ninety-four thousand and two hundred and sixty-one and paise sixty-six only) on the goods valued at Rs. 39,42,612.22 cleared by HMT (WF) and seized from the custody of BMWAU. (Total amount of duty demanded : Rs. 78,67,616.99) B. Fine in lieu of confiscation : (i) Fine of Rs. 1,000/- (Rupees one thousand only) in lieu of confiscation of watch components valued at Rs. 7,945.50). (ii) Fine of Rs. 1,000/- (Rupees one thousand only) in lieu of confiscation of the Ambassador Car Bearing Registration No. MEN.231. (iii) Fine of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted and after communication of such decision on 3-4-1984, the factory had started maintaining R.G.1. Referring to the charges in the Show Cause Notice relating to the destruction of watch components the learned Consultant pointed out that the entire quantity of defective components were not destroyed as alleged in the Show Cause Notice because out of the rejects some quantity was sent for re-work, some quantity which were found usable were sent to the finished parts stores and out of the rejects some components were destroyed. In this connection, the learned Consultant referred to the case law reported in 1983 E.L.T. 2095 wherein the Bombay High Court in the case of J.K. Vacuum Flasks had observed that there is no provision in Central Excises and Salt Act and the Rules for noting day-to-day breakages of vacuum flasks and that therefore, if the manufacturer could not produce any account for the deficiency of the goods at the time of its checking, he was not liable for penalty and the Consultant pointed out that in the present case, the appellants did have records for the components destroyed as unfit for consumption. He also pointed out with reference to the guide card maintain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the context of very large number of such components which are involved in comparison to which the actual excesses found is negligible and also due to the fact that many of these components are very small in size and could not even be seen by naked eye. At any rate, the quantum of penalty and fine imposed on the three appellants is disproportionate and harsh having regard to the nature of the offence which is only technical. 4. Appearing for the department, the learned S.D.R., Shri K.K. Bhatia contended that the appellant, M/s. HMT Watch Factory, being a Public Sector Undertaking, could not make any difference to a violation committed by them of the Central Excise law. The annexures to the Show Cause Notice clearly bring out the differences in quantity and the clearances without Central Excise documents. He pointed out that the appellant's reply has been in general terms and no specific rebuttal with facts and figures to the details given in the annexures to the Show Cause Notice had been put forth by the appellants before the Collector. The learned S.D.R. further contended that according to Section 3 of the Central Excises and Salt Act, which is the charging Section, excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting of materials received and issued by way of Consolidated Stores Return Note, Consolidated Stores Demand Note and Stock Control Card (Bin Card) and Guide Card are sufficiently detailed. It is also on record that the department had in fact accepted the Consolidated Return Note/Demand Note and Stock Card of the appellants factory in lieu of R.G. 1 and G.P. 1 in respect of watch component screws. It has also been stated by the appellants without anything contra that the Departmental officers, Internal and Accountant General's Audit parties during their visits have verified these records and also that under Production Based Control checks the Central Excise Range staff have verified the production from these records as also the fact also remains that annual stock taking had also been conducted during the relevant period by the departmental officers. We also find a lot of force in the appellant's contention that the department had raised the demand on these two counts presuming that all components rejected" or reported as processing loss are destroyed without considering their arrangement for reworking and reissue of a part of such components. It has also been shown that with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are shown separately indigenous components are assigned stock number ending with "3" and for imported components, ending with "1". Bought-out components have similarly stock number ending with "2" or "4". This procedure had been stated to be followed by HMT from the beginning. A perusal of the dispatch voucher available on record bears out the claim regarding the pattern of numbering as the last digit in the stock numbers is as stated by the appellants. It is the further claim that the ancillary units avail of set off of duty on components covered by Central Excise Gate Passes under Notification No. 201/79 by making entries in RG. 23 statutory Excise account and they enter all the receipts on bin cards maintained by the ancillary units. In this context it has been submitted that thus if duty has been paid on the components, they would get set off and hence there is no special advantage to be gained by sending and receiving components without payment of duty. It is observed that in their reply to Show Cause Notice dated 6-12-1985, the appellants HMT Watch Factory had furnished the statement showing the dispatch of indigenous and imported components from their factory to the ancill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispatch vouchers showing indigenous and imported and bought-out components identifiable by stock numbers, and as the GP 1s were being enclosed to the RT5 returns submitted by the appellants for department's scrutiny. Since the appellant's case in this regard based on the above-said records both statutory and private, has not been considered and examined by the department, the order confiscating components valued at Rs. 40,83,426.61 and Rs. 39,42,612.22 and the demand for duty thereon is set aside. 8. As regards the charge of non-maintenance of raw material account in form IV and non-submission of RT5 returns the appellants admittedly were not maintaining the raw material account in form IV nor were they submitting RT5 returns although the Collectorate Trade Notice dated 22-9-1987 prescribed main plate as principal raw material for watches and the jurisdictional Superintendent wrote to them on 20-10-1981 asking them to comply. The appellants have not denied this position but have only pleaded that they had to ask for some time and that they have since then started maintaining the account and submitting the returns. There has clearly been a lapse on their part in this regard for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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