Private registers and corroborating statements can prove clandestine removal, but penalties need statutory authority under the governing duty law.

Seized private production and lot registers, corroborated by statements from persons connected with manufacture and delivery, were treated as reliable evidence of clandestine removal of man-made fabrics because they covered the relevant period, did not match statutory records, and remained unexplained. On that basis, the additional excise duty demand was sustained. Confiscation and penalties were, however, set aside because the penal provisions of the Central Excise Act and Rules were not applicable at the material time to proceedings under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, leaving only the duty liability intact.

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Issues: (i) whether the demand of additional excise duty of Rs. 25,34,875/- on alleged clandestine removal of man-made fabrics was sustainable on the basis of the seized production and lot registers and supporting statements; (ii) whether confiscation of goods and imposition of penalties were legally sustainable in respect of evasion of duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

Issue (i): Whether the demand of additional excise duty of Rs. 25,34,875/- on alleged clandestine removal of man-made fabrics was sustainable on the basis of the seized production and lot registers and supporting statements.

Analysis: The demand was founded on private printing registers maintained at the contractor's flat-bed section, corroborated by statements of the printing masters, contractor's supervisors, excise clerk, directors, recipients of the goods, and the factory registers. The seized registers covered the relevant period and showed production figures not tallying with the RG 1 and lot registers. Since the registers were seized from the premises, were maintained in the ordinary course of the printing job, and were affirmed by the persons maintaining them, their authenticity was accepted. The absence of an alternative plausible explanation from the appellants, coupled with the seizure of unaccounted MMF, supported the conclusion that the appellant had removed processed fabrics without payment of duty.

Conclusion: The demand of Rs. 25,34,875/- was upheld.

Issue (ii): Whether confiscation of goods and imposition of penalties were legally sustainable in respect of evasion of duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

Analysis: The adjudication order imposing confiscation and penalties was found unsustainable because the penal provisions of the Central Excise Act and Rules were not applicable, at the material time, to evasion under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The governing legal position negatived the levy of confiscation and penalties in such proceedings.

Conclusion: Confiscation and penalties were set aside.

Final Conclusion: The duty demand was sustained, but the confiscation and penalty components were deleted, resulting in partial relief to the company and complete relief to the directors.

Ratio Decidendi: Seized private registers maintained in the ordinary course of production, when corroborated by surrounding evidence and left unexplained, can validly sustain a finding of clandestine removal; however, confiscation and penalty cannot be imposed where the applicable duty statute does not authorise such penal consequences.

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