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4. We find from the record that the appellant imported 255970 mechanical watch movements and availed modvat credit of Rs. 24,35,647/- in respect thereof. These movements were imported by them for manufacture of quartz watches. But such movements could not be used in the manufacture of these watches and this fact had not been disputed by Shri Ishar Das Moolrajani, the Managing Director of the company. The plea of the appellant company that in fact that those were not mechanical watch movements, but quartz watch movements which were imported through Bill of Entry and the same were utilized in the manufacture of the quartz watches, in our view, had been rightly rejected by the adjudicating authority. In all the Bill of Entry, the description of the movements recorded was watch movement mechanical. But the appellant company with a view to create the evidence of having imported quartz watch movements erased the word mechanical by applying white fluid in those Bill of Entry. They also to camouflage the illegal act, entered those movements as quartz movements in the record i.e. Form IV register and RG 23A Part-I register. Shri Isher Das Mull Raj, Managing Director of the company, when confronted with the documents could not offer any plausible explanation. The mechanical watch movements were never used by them admittedly and as such no modvat credit could legally be claimed by them in respect thereof. Therefore, the duty demand of Rs. 24,35,647/- in respect of these watch movements on which the appellant company claimed modvat credit illgally had been rightly demanded and confirmed against them.

5. The shortage of 96017 pieces of watch cases and 7548 pieces of quartz movements on physical stock verification taken by the officers in the factory premises of the appellants company allegedly was detected as detailed in the show cause notice involving duty of Rs. 36,87,053/- and Rs. 64,410/- respectively. But this shortage had been duly explained by the appellant company. According to the company, it had stock of very old watch cases/quartz movements which were not useable/saleable and as such those were, re-melted, resulting in the shortage of the watch cases and this explanation could not be out rightly rejected by the adjudicating authority, for want of any evidence to prove the clandestine clearance of the same by the company in the market to various buyers. In the absence of any tangible evidence regarding removal and sale of short found watch cases and quartz movement, the duty in respect thereof could not be confirmed on the company by drawing assumptions and presumptions in the regard. There is no tangible evidence to establish that these goods were cleared by the company in the market. No oral or documentary evidence in this regard had been collected. Therefore, the duty demand of Rs. 36,87,053/- and Rs. 61,450/- against the company in respect of these goods, is set aside.

6. We also find that the duty demand of Rs. 69,79,797/- has been raised against the company on account of clandestine removal of 247007 watch cases. This demand, in fact, had been based on the strength of rough entries in a pad and some loose papers found in the factory at the time of visit by the officers. But allowed to cross-examine them. Therefore, these two duty demands are also set aside.

7. In this appeal M/s. Rachi Ram and Sons (in short M/s. RSS) is the appellant. The duty demand has been raised against this firm for having wrongly availed modvat credit on the imported mechanical watch movements and removed the quartz watches in a clandestine manner. We find that duty of Rs. 5,12,343/- and Rs. 6,79,563/- had been confirmed against the appellant firm on account of fraudulent availment of modvat credit on the mechanical watch movements not physically received by them and duty of Rs. 6,75,109/- has been confirmed against them on account of clandestine removal of the wrist watches without payment of duty during the period in question. The contention raised by the learned Counsel that the demand for wrong availment of credit amounts, had been wrongly confirmed without any tangible evidence to substantiate the allegations, in our view, is not liable to be accepted. We find that the firm had shown the use of mechanical watch movements in the manufacture of digital electronic watches whereas in such watches, these movements could not be used at all as for the manufacture of digital electronics watches, digital modules are required. This fact had been also not disputed by Shri Isher Das Moolrajani, partner of the very author of the entries in the documents had not been identified. Mere unsatisfactory explanation regarding the entries in these documents by the M.D. and authorized signatory of the company, did not warrant an inference that these goods were manufactured and removed clandestinely, especially when there is not tangible evidence to prove the correctness of these entries and actual removal of goods to various buyers by the company in the market. Even the names of buyers had not been identified to whom the goods were cleared. Therefore, the duty demand of the above referred amount in respect of these goods, is set aside, in the light of the above referred facts and ratio of the law laid down in the case of Sukh Ram and Sons v. UOI, 1978 (2) ELT 525; and Collector of Central Excise v. Decent Dyeing Co. 1990 (45) ELT 201 (SC), that it is for the Department to prove the removal of the goods without payment of duty by the manufacturer.

9. However, the clandestine removal of the goods (quartz watches) involving duty of Rs. 6,75,109/- by the appellant firm, does not stand proved from any reliable evidence. This duty has been confirmed only on the basis of torn slips recovered from the premises of the firm. But the slips did not contain the names of buyers to whom watches were sold. The ocular testimony of Shri Vinod Arora,Manager, could not taken as sufficient proof of removal of watches by the firm as entered in the slips without corroboration from any other tangible evidence. No statement of any buyer had been recorded in the regard. Even names of the buyers had not been identified to whom the watches were sold by the firm during the disputed period without payment of duty. Therefore, the duty demand of Rs. 6,75,109/- is set aside.