Per Justice U.L. Bhat :

Appellant, being aggrieved by order dated 3.5.1989 passed by the Additional Collector of Central Excise, Indore, has filed this appeal. By this order the Additional Collector confirmed demand of duty of excise of Rs. 67,842.85 and imposed penalty of Rs. 25,000.00. The cross-objection filed by the Department merely supports the impugned order. We have heard both sides.

2. Appellant, engaged in the manufacture of power looms as well as winding machines and spare parts, was filing price lists from time to time and on approval of the same, was clearing the goods on payment of appropriate duty. The dispute in this appeal relates to machines covered by price list in Part II in respect of the period October, 1982 to September, 1987. Appellant was maintaining RG I register and other registers in respect of machines and spare parts. There was surprise inspection on 29.9.1987 when the officers came across order registers for 1987-88 and 1984-85 which contained entries of orders received by the workshop from the office in respect of spare parts for replacement and against shortage or breakage. The other registers were not immediately available. It was found that these spare parts produced for replacement, shortage or breakage had not been accounted for in RG I register and no excise duty had been paid on them at the time of their clearance. Statements of Assistant Manager (Stores) and Sales Manager of the appellant were recorded which supported the inference that such spare parts had been produced without accounting in the excise registers and had been removed without payment of duty at the time of clearance. Further investigation was made. Ultimately, on 8.8.1988 show cause notice was issued to the appellant with the above averments and specifically alleging suppression of production of such spare parts in the excise documents and surreptitious removal of spare parts without payment of duty and invoking larger period of limitation under the proviso to Section 11A of the Central Excises Act, 1944. A detailed memorandum of facts accompanied the show cause notice. Appellant resisted the notice on merits as well as on the question of limitation, contending, inter alia, that the agreement which had been produced before the officers along with the price list, clearly showed the liability of the appellant to replace defective parts within a period of one year from the date of supply of the machines, that while fixing the price of each machine the appellant was taking into consideration the supply of replacements which was required to be made in the coming year and inclusion of the price thereof in the price of the machine shown in the contract. It was also contended that all the facts were within the knowledge of the officers concerned and there was no suppression of any material aspect as alleged. Overruling these contentions, the Additional Collector confirmed the demand and imposed penalty.

3. Before the show cause notice, the amount covered by the demand was paid by the appellant under protest. Pages 22 to 57 contain a list of the dates on which clearances of replacement and spare parts had been made and the total amount of duty required to be paid but not paid at the time of clearances. It is contended for the appellant that the anticipated cost of the replacement parts had been included in the original price declared in the price list and, therefore, when duty was paid on such price at the time of clearance of the machines, the duty paid included the element of duty on the spare parts likely to be supplied during the period of one year. Appellant has not produced before us copies of the price lists. There is no other material before us to show that along with the price list or on any subsequent occasion prior to the approval thereof, the appellant had produced before the Department any work-sheet showing that the price declared in the price list was inclusive of the price of any spare parts which may be required