K.K.USHA, J. - (1.)THIS is an appeal at the instance of the assessee challenging the order passed by the Commissioner of Central Excise/ Indore, dated 29 -8 -2003. Under the above order the Commissioner has upheld the demand of duty against the appellant to the extent of Rs. 3,79,96,012/ - under the proviso to Section 11A(1) of the Central Excise Act, 1944 and imposed an equal amount of penalty under Section 11AC of the Act and Rule 173Q of the Central Excise Rules, 1944.
(2.)APPELLANTS are engaged in the manufacture of colour picture tubes (CPTs for short) at their factory at Malanpur, District Bhind (MP). The CPTs so manufactured by the appellants are supplied to various colour TV manufacturers on payment of appropriate central excise duty. Sometimes buyers noticed defects in CPTs at the time of assembly of the TV. On receipt of complaint, appellants' engineers would go to the factory of the buyers and repair the same. Those CPTs which could not be repaired at the factory of the buyer were brought to the appellants factory following the procedure under 57F(4)/173H of the Central Excise Rules, 1944. In the show cause notice issued to the appellants on 26 -4 -2002 followed by a corrigendum dated 29 -5 -2002, it was alleged that in the guise of repairing defective CPTs they were replacing the same with new CPTs under the warranty clause without paying central excise duty. According to the Revenue during the period 1 -4 -97 to 21 -12 -99 the appellant had received 40567 numbers of 20" and 22037 numbers of 21" CPTs valued at Rs. 20,47,40,200/ - under Rule 57F(4)/173H showing as repaired and cleared. The appellants have evaded central excise duty amounting to Rs. 3,41,66,172/ - on this count. It was further alleged that the appellant had not accounted for the disposal of 1,12,360 numbers of 'electron guns' which are modvatable inputs. Therefore, Modvat credit of Rs. 38,29,840/ - taken on the said input was also to be recovered from the appellant in terms of Sub -rule (1)(ii) of Rule 57 -1. There were certain other allegations in the show cause notice which were not upheld by the adjudicating authority. The show cause notice proceeded on the basis of the correspondence between the appellant and buyers' representatives etc. wherein the term "replacement" has been used in respect of CPTs received under Rule 173H/57F(4) for repairs.
(3.)APPELLANT submitted detailed reply to the show cause notice and also sought cross -examination of various persons whose statements and correspondence were relied on in the show cause notice. Opportunity was granted to cross -examine only two persons, out of whom one instead of appearing in person sent a sworn affidavit to the Commissioner.
It is the case of the appellant that the term 'replacement' is used in the trade in a loose manner under the warranty clause and in some cases the CPTs are repaired by minor processes and in some other cases certain parts namely, purity magnets, rubber wedge, deflection yoke etc. will have to be replaced. The process is only repair. The adjudicating authority also holds that the process of repair would not amount to manufacture. But, on the basis of the word used 'replacement' the Commissioner comes to the conclusion that appellants are replacing defective CPTs with newly manufactured one and cleared without payment of duty. It is the case of the appellant that apart from the correspondence there are no material whatsoever which would substantiate the allegation of clandestine removal of CPTs. Commissioner had placed reliance on the statement of Shri Gurpreet Singh of M/s. Bestavision in support of the finding that defective CPTs are being replaced by the appellant and not repaired. While cross -examined by the appellant he categorically stated that the defect found in CPTs are like conversion and static, focus out, black spot, switch of spot, patch, scratch and shadow mark. Most of these defects are rectified in their factory by the Hotline Engineers and others are sent back to Hotline under Rule 57F challans to rectify the defects. When a specific question was put to him as to what it meant by replacement of CPT in warranty period, he answered as follows : "Whatever is sent for repair the same is sent back to us after replacement of some parts in the CPT and repairing and same comes back to us. This is because that the same Sl. No. is given when it is going and when it comes back." He also stated that 57F(4) registers are duly authenticated by the Central Excise officers for sending the CPTs. The appellant would contend that this part of the evidence of Shri Gurpreet Singh had not been appreciated correctly by the learned Commissioner.