Clandestine removal evidence from contemporaneous documents sustained duty demand; unaccounted engines confiscated, raw material confiscation set aside.

Contemporaneous factory documents, including a duplicate invoice, lorry receipt and octroi materials, were read together to support a finding of clandestine removal because the core particulars matched and minor discrepancies did not discredit the evidence; the duty demand was sustained. Unaccounted diesel engines not reflected in statutory records were validly confiscated, though the redemption fine was reduced. Confiscation of raw materials was set aside because no sustainable rule-based basis existed for that category of goods. Penalties were correspondingly moderated, with the principal penalty reduced, one penalty set aside, and connected penalties reduced.

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Issues: (i) whether the demand of duty was sustainable on the basis of a recovered duplicate invoice and related transport documents showing clandestine removal of engines; (ii) whether confiscation of 19 unaccounted diesel engines and reduction of redemption fine was justified; (iii) whether confiscation of raw materials was legally sustainable; and (iv) whether the penalties imposed on the appellants required modification.

Issue (i): whether the demand of duty was sustainable on the basis of a recovered duplicate invoice and related transport documents showing clandestine removal of engines

Analysis: The duplicate invoice, lorry receipt and octroi-related materials were read together. The common particulars of truck number, description of goods, date and destination were found to tally, and the invoice itself indicated transport through Globe Cargo Service. The discrepancy relied upon by the assessee was held insufficient to dislodge the evidentiary value of the documents recovered from the factory.

Conclusion: The finding of clandestine removal was upheld and the duty demand was sustained.

Issue (ii): whether confiscation of 19 unaccounted diesel engines and reduction of redemption fine was justified

Analysis: The engines were not shown in the statutory records, and no material was produced to establish that they were properly accounted for elsewhere. In the circumstances, failure to record their production in the prescribed records was treated as sufficient basis for confiscation, though the redemption fine called for moderation.

Conclusion: Confiscation of the 19 engines was upheld, while the redemption fine was reduced.

Issue (iii): whether confiscation of raw materials was legally sustainable

Analysis: The raw materials were seized only on the premise that they might be used for clandestine production. The order recorded that there was no rule-based basis for confiscation of unaccounted raw material in the absence of Modvat credit being taken. That reasoning was accepted as unsustainable.

Conclusion: Confiscation of the raw materials was set aside.

Issue (iv): whether the penalties imposed on the appellants required modification

Analysis: Since the principal demand and confiscation of engines were maintained but the confiscation of raw materials was set aside, the penalties were correspondingly moderated. The penalty under Section 11AC of the Central Excise Act, 1944 was reduced, the penalty under Rule 173Q of the Central Excise Rules, 1944 was set aside, and the connected penalties on the other appellants were reduced.

Conclusion: The penalties were partly sustained and partly reduced.

Final Conclusion: The order was sustained on the duty demand and confiscation of engines, but relief was granted by setting aside the confiscation of raw materials and by reducing or deleting the penalties to the extent indicated.

Ratio Decidendi: When contemporaneous documents recovered from the factory mutually corroborate the movement of excisable goods, minor discrepancies that do not affect the core particulars do not defeat a finding of clandestine removal; confiscation and penalty must, however, rest on a sustainable statutory basis for each category of goods.

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