Clandestine diversion and forged documents justified penalty, but excessive quantum was reduced on proportionality grounds.

Statements recorded under Section 14 of the Central Excise Act, 1944 admitted participation in documentary transactions designed to that nylon filament yarn had moved to the recipient unit at nil duty, and the record did not establish any effective retraction before the adjudicating authority. Supporting evidence included confirmation of forged signatures by the concerned officer, so the conduct was treated as fraudulent and liable to penalty under the provisions invoked. The penalty was sustained on merits, but the quantum was found excessive because no penalty had been proposed under Section 117 of the Customs Act, 1962 and the maximum penalty under Rule 198 of the Central Excise Rules, 1944 was nominal; the penalty was therefore reduced.

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Issues: Whether the appellant was liable to penalty for abetment of clandestine diversion of nylon filament yarn and whether the penalty imposed required reduction in quantum.

Analysis: The appellant's statements under Section 14 of the Central Excise Act, 1944 admitted his role in the documentary transactions used to make it appear that the goods had moved to the recipient unit at nil duty. The record did not establish that the alleged retraction affidavit was actually filed before the adjudicating authority, and the department's case was further supported by confirmation from the concerned officer regarding forged signatures. The appellant's conduct was found to be fraudulent and sufficient to attract liability under the penal provisions invoked. However, the notice did not propose penalty under Section 117 of the Customs Act, 1962, and the maximum penalty under Rule 198 of the Central Excise Rules, 1944 was only nominal, so the penalty amount awarded by the lower authority was considered excessive.

Conclusion: The penalty was upheld on merits, but its quantum was reduced to Rs. 5 lakhs.

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