Clandestine excise removal may be proved by circumstantial evidence, with duty rate governed by Rule 9A(5) on unauthorised clearances.

Clandestine removal in excise can be established through circumstantial and oral evidence on a preponderance of probability, including recovered invoices, worker and purchaser statements, admissions of unrecorded sales, and fictitious purchases. Where the evidence shows suppressed production and clearances, a related marketing concern may be treated as a dummy unit. If removals are not shown to have been made under statutory clearances, the duty rate is determined under Rule 9A(5) by reference to the rate in force on the relevant date. Confiscation of seized goods and plant and machinery may be sustained, while penalties remain subject to moderation on the facts.

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Issues: (i) whether the demand of central excise duty on tread rubber was sustainable on the basis of the evidence of clandestine manufacture and removal, including the finding that M/s. Nicky Rubber and Chemicals was a dummy unit; (ii) whether the duty rate was to be determined under Rule 9A(5) of the Central Excise Rules, 1944, and whether the penalties required interference.

Issue (i): Whether the demand of central excise duty on tread rubber was sustainable on the basis of the evidence of clandestine manufacture and removal, including the finding that M/s. Nicky Rubber and Chemicals was a dummy unit.

Analysis: The evidence comprised recovered invoices, statements of workers and purchasers, admissions regarding sale of tread rubber without proper documents, and fictitious purchases of carbon black through bogus names. The documentary and oral material showed that the factory had suppressed production and clearances and that the so-called marketing concern had no independent existence. The finding of clandestine removal was reached on the basis of preponderance of probability, which is sufficient in excise adjudication.

Conclusion: The demand of duty and the finding of clandestine removal, including the conclusion that the marketing concern was a dummy unit, were upheld.

Issue (ii): Whether the duty rate was to be determined under Rule 9A(5) of the Central Excise Rules, 1944, and whether the penalties required interference.

Analysis: As the removals were not shown to have been made in accordance with statutory clearances, the rate applicable was the rate in force on the relevant date under Rule 9A(5). The confiscation of the seized tread rubber and the plant and machinery was sustained, but the quantum of penalties was re-examined in light of the total circumstances and was reduced for the main assessee and two partners, while the penalty on the remaining noticee was left undisturbed.

Conclusion: Rule 9A(5) was held applicable, confiscation was maintained, and the penalties were modified by reduction in part.

Final Conclusion: The substantive liability and confiscation were affirmed, but the penal consequences were moderated to the extent indicated, resulting in partial relief to the appellants.

Ratio Decidendi: In excise adjudication, clandestine removal may be established by circumstantial evidence on a preponderance of probability, and where removals are not shown to have been made in accordance with statutory clearances, the applicable duty rate is governed by Rule 9A(5).

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