2006 (11) TMI 72

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..... tter Connecting Rods and Lister Connecting Rods. The said goods were being cleared by them on the basis of the invoice-value, for which a declaration was filed by them. During the period from January, 1994 to March, 1994, the appellants cleared 2028 pieces of Petter Connecting Rods at price of Rs. 26,750/- (Rupees twenty-six thousand seven hundred and fifty); 482 pieces of Lister Connecting Rods at price of Rs. 10,700/- (Rupees ten thousand seven hundred) under different gate passes. Inasmuch as the price of Petter Connecting Rods/Lister Connecting Rods, as per the other invoices issued by the appellant company, was around Rs. 125/- (Rupees one hundred and twenty-five), the Revenue, while scrutinizing their RT-12 returns, entertained a view .....

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..... ific dimensions and have other specifications. These are utilized as parts of diesel engines and, therefore, have to conform to precise specifications. In the manufacture thereof, the appellants have also inadvertently produced undersized rods which could not be used as parts of diesel engine and, therefore, have to be treated as scrap, or rejections. The evidence in the invoice also reflects the fact of rejection of the rods sold on weight basis. The 7 tonne total quantity, involving duty of Rs. 41,445/- is said to be the value and duty of such rejection lot which had accumulated over a period of time, and this sale was one-time sale of rejected goods. This quantity is also claimed to be only a small percentage of the total manufacture mad .....

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..... of one year by physical verification of the stock of scrap generated and available in the appellant unit at present and thereafter allow the benefit of scrap in respect of such quantities. The appellants should also be asked to give a reasonable explanation for having entered the said numbers of rejected Petter Connecting Rods and Turning Rods in RG-I Register, when the same were known to them to be substandard, but no remark to this effect has been given in the register. In order to enable this action I am setting aside the impugned order with the directions that the demand should be modified in accordance with the directions contained in this order. Penalties should only be resorted to in de novo proceedings, if the percentage of substa .....

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