Clandestine removal proved by parallel invoices and corroborative records, while penalties were modified because Section 11AC was not yet in force.

Non-supply of documents and an alleged defect in the panchnama did not establish breach of natural justice where the records had been supplied or inspected and the seized documents were otherwise identified. Duty demand was sustained because parallel invoices, undisclosed invoices, and corroborative railway and DGS&D records proved clearances without duty and supported clandestine removal. The equal penalty under Section 11AC was set aside because the relevant period predated its introduction, and the individual penalties were recalibrated according to each noticee's role: sleeping partners were exonerated, the non-partner's penalty was deleted, and the authorised signatory's penalty was reduced.

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Issues: (i) whether there was violation of natural justice for non-supply of documents and an allegedly defective panchnama; (ii) whether the duty demand based on parallel invoices and records from the railways and DGS&D was sustainable; (iii) whether the penalty under Section 11AC and the connected penalties on the partners and authorised signatory were liable to be sustained in full.

Issue (i): Whether there was violation of natural justice for non-supply of documents and an allegedly defective panchnama.

Analysis: The record showed that the documents had been supplied pursuant to the earlier remand and that the appellant had inspected the relevant records and declined copies. The panchnama was not rendered invalid merely because page numbers were omitted, since the seized records were identified and inspected during the proceedings.

Conclusion: No violation of natural justice was established, and the objection to the panchnama failed.

Issue (ii): Whether the duty demand based on parallel invoices and records from the railways and DGS&D was sustainable.

Analysis: The demand was supported by documentary evidence, including admitted maintenance of two sets of invoices, undisclosed invoices not reflected in returns, and corroborative records from the railways and DGS&D. The evidence established clearances without payment of duty and supported the finding of clandestine removal.

Conclusion: The duty demand was upheld.

Issue (iii): Whether the penalty under Section 11AC and the connected penalties on the partners and authorised signatory were liable to be sustained in full.

Analysis: The equal penalty under Section 11AC could not apply because the relevant period preceded its introduction on the statute book. The personal penalties were reappraised in light of the role of each individual; the sleeping partners were found not liable, the non-partner's penalty was set aside, and the authorised signatory's penalty was reduced.

Conclusion: The equal penalty under Section 11AC was set aside, and the connected penalties were modified by reduction or deletion, as appropriate.

Final Conclusion: The demand of duty was sustained, but the penalty framework was substantially modified by deleting the equal statutory penalty and by reducing or setting aside the individual penalties, resulting in a partial success for both sides.

Ratio Decidendi: When clandestine removals are proved by contemporaneous and corroborative documentary records, the duty demand can be sustained, but a statutory penalty cannot be imposed for a period when the penal provision was not in force, and personal penalties must follow the proved role of each noticee.

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