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Issues: (i) Whether duty on clandestinely removed goods had to be recomputed on the basis of cum-duty price by applying the MRF formula; (ii) whether the penalty under Section 11AC of the Central Excise Act, 1944 was to be restricted to 25% of the duty where duty and penalty were paid within the stipulated period; (iii) whether confiscation of the seized goods and appropriation of the security deposit were liable to be upheld.
Issue (i): Whether duty on clandestinely removed goods had to be recomputed on the basis of cum-duty price by applying the MRF formula.
Analysis: The removal of goods without accountal in the RG-I register was admitted. In determining duty on such clearances, the assessable value could not be treated as excluding duty where the sale proceeds represented the full price realised. The settled approach was to treat the amount as cum-duty price and work back the assessable value by applying the MRF formula.
Conclusion: Duty on the clandestinely removed goods was required to be redetermined on a cum-duty basis by applying the MRF formula.
Issue (ii): Whether the penalty under Section 11AC of the Central Excise Act, 1944 was to be restricted to 25% of the duty where duty and penalty were paid within the stipulated period.
Analysis: The penalty under Section 11AC was held to be reducible to 25% of the duty where the duty and penalty were paid within the prescribed period. Since payment had been made within the stipulated time, imposition of a higher penalty was not justified and the penalty had to follow the statutory limit after recomputation of duty.
Conclusion: The penalty under Section 11AC was confined to 25% of the duty as redetermined.
Issue (iii): Whether confiscation of the seized goods and appropriation of the security deposit were liable to be upheld.
Analysis: The seized goods were found unaccounted and the materials indicated clandestine removals. On that basis, confiscation and the security deposit taken at the time of provisional release were upheld. At the same time, no second demand of duty could be raised again on the very seized goods once duty had been accounted for in the manner directed.
Conclusion: Confiscation and appropriation of the security deposit were upheld, while no fresh duty demand could be made again on the seized goods.
Final Conclusion: The duty liability was to be recomputed on a cum-duty basis, the penalty stood restricted to 25% of the redetermined duty, and the confiscation and security deposit were sustained.
Ratio Decidendi: In cases of clandestine removal, the sale realisation may be treated as cum-duty price for computing assessable value, and where Section 11AC permits reduced penalty on timely compliance, the penalty is limited accordingly after redetermination of duty.
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