punching old engine number over another engine is illegal. changing engine number over registration book is legal and acceptable to excise & forensic lab.
2 reasons i collected while reading here are as following:
the block over which the number is punched may be from an stolen vehicle registered under an FIR. if forensic lab can trace the old number over the block scientifically vehicle will be impounded.
no 2 vehicles can have identical engine number., you never come to know until there is a spot check and data verification generate an alert.
be careful in such cases