Clandestine removal proved by fictitious invoices and corroborative statements; penalty under excise law partly reduced

Fictitious invoices recovered from the assessee's premises, supported by the un-retracted statements of the authorised representative, excise clerk and director, were sufficient to establish clandestine removal of excisable goods and sustain the duty demand. On penalty, the amount imposed under Section 11AC was reduced because payment had been made before the show cause notice, and the separate penalty under Rule 173Q was set aside as unnecessary on the facts.

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Issues: (i) Whether clandestine removal of excisable goods without payment of duty stood proved on the basis of recovered fictitious invoices and corroborative statements. (ii) Whether the penalty under Section 11AC of the Central Excise Act, 1944 and the separate penalty under Rule 173Q of the Central Excise Rules, 1944 required interference.

Issue (i): Whether clandestine removal of excisable goods without payment of duty stood proved on the basis of recovered fictitious invoices and corroborative statements.

Analysis: The recovery of fictitious invoices from the factory, coupled with the admission of the authorised representative, the excise clerk and the director, provided sufficient corroboration of clandestine clearances. The statements were not retracted and each supported the others. The appellant failed to explain the presence of the bogus invoices found in the premises.

Conclusion: The finding of clandestine removal and the duty demand were confirmed.

Issue (ii): Whether the penalty under Section 11AC of the Central Excise Act, 1944 and the separate penalty under Rule 173Q of the Central Excise Rules, 1944 required interference.

Analysis: Since a sum had already been deposited before issuance of the show cause notice, the quantum of personal penalty under Section 11AC was considered liable to be reduced. The separate penalty imposed under Rule 173Q was found unnecessary in the facts of the case.

Conclusion: The penalty under Section 11AC was reduced and the penalty under Rule 173Q was set aside.

Final Conclusion: The appeal failed on the merits of duty liability, but the penalty component was modified in part, resulting in only partial relief to the assessee.

Ratio Decidendi: Fictitious invoices recovered from the assessee's premises, when supported by un-retracted inculpatory statements, are sufficient to sustain a finding of clandestine removal; penalty may be moderated where mitigating payment is made before the show cause notice.

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