Redemption fine proportionality and Section 11AC penalty upheld for admitted clandestine removal under central excise law.

Redemption fine for confiscated excess cotton yarn was held excessive and reduced on proportionality grounds, with Customs confiscation principles applied mutatis mutandis because the Central Excise Act provides no specific quantum guideline. Penalty under Section 11AC was sustained where clandestine removal was admitted and duty had been paid, as ignorance of central excise law was no defence and the statutory penalty followed the established admission of removal. The appeal succeeded only to the limited extent of reduction of redemption fine, while the penalties for clandestine removal were upheld.

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Issues: (i) Whether the redemption fine imposed in lieu of confiscation of the seized cotton yarn was excessive and required reduction; (ii) Whether the penalty imposed under Section 11AC was sustainable in a case of admitted clandestine removal.

Issue (i): Whether the redemption fine imposed in lieu of confiscation of the seized cotton yarn was excessive and required reduction.

Analysis: The confiscation was based on excess stock of cotton yarn found in the factory and the fine had to be tested on the basis of proportionality. The Central Excise Act does not lay down detailed guidelines for fixing redemption fine, and the principles governing confiscation under the Customs Act can be followed mutatis mutandis. On that basis, the fine imposed by the lower authorities was considered excessive.

Conclusion: The redemption fine was reduced from Rs. 6,000/- to Rs. 4,000/- in one appeal and from Rs. 9,000/- to Rs. 6,000/- in the other, in favour of the assessee.

Issue (ii): Whether the penalty imposed under Section 11AC was sustainable in a case of admitted clandestine removal.

Analysis: The duty liability on the removed goods had been admitted and paid. Ignorance of Central Excise law and procedure was rejected as no valid defence. Where clandestine removal stands admitted, penalty under Section 11AC follows, and the penalty equal to duty represented the statutory maximum.

Conclusion: The penalties of Rs. 41,239/- and Rs. 28,422/- under Section 11AC were sustained, in favour of the Revenue.

Final Conclusion: The appeal succeeded only to the limited extent of reduction of redemption fine, while the penalties for clandestine removal were upheld.

Ratio Decidendi: In cases of admitted clandestine removal, penalty under Section 11AC is sustainable, and redemption fine may be moderated by applying the principle of proportionality, with Customs law guidance used mutatis mutandis where the Central Excise Act provides no specific quantum guidelines.

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