Section 11AC penalty sustained for clandestine clearance, but quantum reduced and personal penalty set aside for lack of finding.

Penalty under Section 11AC of the Central Excise Act was held sustainable where the duty demand remained unchallenged and clandestine manufacture and clearance were supported by admissions and recorded statements, though the penalty amount was reduced on the facts. The redemption fine on confiscated tin containers was also found excessive and was reduced in the interests of justice, while confiscation itself was not disturbed. The personal penalty on Shri Prem Gupta was set aside because the order contained no specific finding explaining its basis.

---

---

Issues: (i) whether penalty on the appellant firm under Section 11AC of the Central Excise Act, 1944 was sustainable; (ii) whether the redemption fine imposed on the confiscated tin containers was liable to be reduced; (iii) whether the personal penalty imposed on Shri Prem Gupta could be sustained.

Issue (i): whether penalty on the appellant firm under Section 11AC of the Central Excise Act, 1944 was sustainable.

Analysis: The demand of duty was not challenged, and the findings regarding clandestine manufacture and clearance, supported by admissions and statements recorded in the proceedings, remained undisturbed. On those findings, penalty under Section 11AC was attracted. The circumstances, however, were considered relevant for moulding the quantum of penalty.

Conclusion: The penalty on the appellant firm was sustainable, but it was reduced to Rs. 50,000.

Issue (ii): whether the redemption fine imposed on the confiscated tin containers was liable to be reduced.

Analysis: The confiscation was not set aside, but the fine was considered excessive in the facts and circumstances of the case. The quantum of redemption fine was therefore modified in the interest of justice.

Conclusion: The redemption fine was reduced from Rs. one lakh to Rs. 25,000.

Issue (iii): whether the personal penalty imposed on Shri Prem Gupta could be sustained.

Analysis: The impugned order did not record any specific finding explaining the basis for imposition of personal penalty on Shri Prem Gupta. In the absence of such a finding, the penalty could not be maintained.

Conclusion: The personal penalty on Shri Prem Gupta was set aside.

Final Conclusion: The duty demand was upheld, the firm's penalty was reduced, the redemption fine was reduced, and the personal penalty was annulled, resulting in only partial relief to the appellants.

Ratio Decidendi: Penalty under Section 11AC follows a sustained duty demand founded on clandestine clearance, but the quantum may be moderated on the facts; a personal penalty cannot survive without a specific finding supporting its imposition.

---