Clandestine removal requires concrete evidence; mere shortage was insufficient to justify penalty pre-deposit and recovery stay.

Duty having been paid before the show cause notice, the penalty under Section 11AC was challenged as resting on an unproven allegation of clandestine removal. The CEGAT noted that clandestine removal is a positive act that must be established by concrete evidence, and that a mere shortage of goods or a presumption drawn from an evasion-prone commodity is insufficient at the stay stage. On that prima facie basis, complete waiver of pre-deposit of the penalty amount was granted and recovery was stayed pending appeal.

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Issues: Whether the applicants had made out a prima facie case for complete waiver of pre-deposit of the penalty amounts and stay of recovery pending appeal, where the duty had already been paid and the penalty under Section 11AC of the Central Excise Act was founded on alleged clandestine removal.

Analysis: The duty had been discharged before the show cause notice. The penalty was levied on the basis that shortage of goods necessarily implied clandestine removal. The finding was held to be prima facie unsustainable because clandestine removal is a positive act that must be established by concrete evidence, and a mere shortage or presumption based on the commodity being evasion-prone is insufficient at the stay stage.

Conclusion: Complete waiver of pre-deposit of the penalty amounts and stay of recovery were granted pending the appeal.

Final Conclusion: The appellants were relieved from depositing the penalty amounts during the pendency of the appeals, and recovery proceedings were stayed for their consideration on merits.

Ratio Decidendi: A finding of clandestine removal cannot rest merely on shortage or presumption and must be supported by concrete evidence before a penal liability is enforced.

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