Corroboration of private records and prospective penalty application govern re-quantification of excise demand and penalty relief.

Duty based on entries in private records can be sustained only to the extent those entries are corroborated by reliable evidence; the demand was therefore re-quantified on the corroborated quantity, with abatement from sale price in computing assessable value. Penalty under Section 11AC could not apply for a period before the provision came into force, and a composite penalty imposed without separating liability under distinct provisions was unsustainable; that penalty was set aside. The redemption fines were sustained.

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Issues: (i) whether duty demand based on entries in a private notebook could be sustained in full, and whether the assessable value required abatement from sale price; (ii) whether penalty under Section 11AC of the Central Excise Act, 1944 could be imposed for the disputed period, and whether a composite penalty under multiple provisions was sustainable.

Issue (i): whether duty demand based on entries in a private notebook could be sustained in full, and whether the assessable value required abatement from sale price

Analysis: Private records used to support a demand of duty can be relied upon only to the extent they are corroborated by reliable evidence. The original statement of the factory manager supported only a limited clearance figure, and the later retraction was not accepted as voluntary. On that basis, the duty could not be sustained on the entire quantity assumed by the department. The assessee was also entitled to abatement of duty from the sale price while reworking the assessable value.

Conclusion: The demand of duty was not sustained in its original form and had to be re-quantified on the basis of the corroborated quantity with abatement from sale price.

Issue (ii): whether penalty under Section 11AC of the Central Excise Act, 1944 could be imposed for the disputed period, and whether a composite penalty under multiple provisions was sustainable

Analysis: Penalty under Section 11AC could not be imposed for a period prior to its coming into force. A composite penalty imposed without separating the liability under the distinct provisions was also unsustainable. The redemption fines were not interfered with.

Conclusion: Penalty under Section 11AC was set aside, and the composite penalty could not be sustained.

Final Conclusion: The appeal succeeded in part: the duty demand was sent back for re-quantification, the penalty under Section 11AC was set aside, and the redemption fines were sustained.

Ratio Decidendi: A duty demand founded on private records can be sustained only to the extent those records are corroborated by reliable evidence, and penalty cannot be imposed under a provision not in force during the relevant period.

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