Corroborative evidence limits excise demand; mandatory penalty cannot apply retrospectively before Section 11AC commenced.
Duty demand for alleged undervaluation was sustainable only to the extent supported by positive corroborative evidence, including excess consideration traced to some dealers and credits found in the partners' accounts; the balance of the demand could not stand beyond the evidence actually collected. Mandatory penalty under Section 11AC of the Central Excise Act, 1944 could not be imposed for a period preceding its commencement, because a penal provision creating mandatory liability cannot operate retrospectively absent express legislative authority. The restricted duty demand was therefore upheld, while the Section 11AC penalty was denied for the relevant period.
Issues: (i) whether the duty demand could be sustained only to the extent supported by positive corroborative evidence of extra consideration received from dealers and deposits in the partners' accounts; (ii) whether mandatory penalty under Section 11AC of the Central Excise Act, 1944 could be imposed for a period prior to its commencement.
Issue (i): whether the duty demand could be sustained only to the extent supported by positive corroborative evidence of extra consideration received from dealers and deposits in the partners' accounts.
Analysis: The demand arose from alleged undervaluation of fireworks clearances reflected in purchase orders, invoices, dealer statements, and credits in personal accounts. The de novo adjudication recorded that all dealers were not investigated and that the evidence conclusively established the excess consideration only in respect of some dealers and the documentary credits traced to the partners. Where the material available covered only part of the transactions, the demand could be sustained only to that extent and not beyond it. The restriction of demand on the basis of the evidence actually collected was therefore supported by the record.
Conclusion: The restricted duty demand was upheld and the challenge to it failed.
Issue (ii): whether mandatory penalty under Section 11AC of the Central Excise Act, 1944 could be imposed for a period prior to its commencement.
Analysis: The period in dispute preceded the introduction of Section 11AC. A penal provision creating mandatory liability cannot be applied retrospectively unless the statute so provides. Since the provision was not in force for the relevant period, its application was impermissible.
Conclusion: Mandatory penalty under Section 11AC was not leviable for the relevant period.
Final Conclusion: The impugned adjudication was sustained, with the duty confirmed only to the extent established by evidence and the mandatory penalty under Section 11AC denied, and all connected appeals failed.
Ratio Decidendi: A demand of clandestine or suppressed excise value can be sustained only to the extent supported by positive corroborative evidence, and a mandatory penalty provision cannot be applied retrospectively to a period preceding its enforcement.
TaxTMI 
AI Drafter ✕
TaxTMI 
