Clandestine removal and Rule 209A penalty fail without proof of knowing dealing, corroboration, and confiscable goods.

Penalty under Rule 209A of the Central Excise Rules, 1944 requires a recorded finding that the person knowingly dealt with goods liable to confiscation; absent such foundation, the Director's penalty was not sustainable and was set aside. Allegations of clandestine removal must be supported by material showing unaccounted receipt, production or clearance, together with corroboration for any relied-on confession; where the job cards were not linked to the assessee and the evidence was uncorroborated, duty demand and penalty under Rule 173Q read with Section 11AC were not established. The impugned duty-related and personal penalties therefore could not survive.

---

---

Issues: Whether penalty on the Director under Rule 209A of the Central Excise Rules, 1944 was sustainable; whether the allegation of clandestine removal and consequent duty demand and penalty under Rule 173Q of the Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act, 1944 were established.

Issue (i): Whether penalty on the Director under Rule 209A of the Central Excise Rules, 1944 was sustainable.

Analysis: Penalty under Rule 209A is attracted only where there is a finding that the person concerned knowingly dealt with goods liable to confiscation. No finding of confiscability of goods had been recorded against the Director, and the necessary foundation for invoking the provision was absent.

Conclusion: The penalty on the Director under Rule 209A was not sustainable and was set aside.

Issue (ii): Whether the allegation of clandestine removal and consequent duty demand and penalty under Rule 173Q of the Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act, 1944 were established.

Analysis: The material on record did not establish unaccounted receipt, production, or clearance of goods. The recovered job cards were not shown to be connected with the assessee through handwriting or authorship by its personnel, and the confessional statement relied upon was unsupported by corroborative evidence. Since the duty had also been paid, the basis for sustaining the penal action was not made out.

Conclusion: The allegation of clandestine removal was not proved, and the duty-related penalty under Rule 173Q read with Section 11AC was not sustainable.

Final Conclusion: The impugned order imposing duty-related and personal penalties could not survive, and the appeals succeeded.

---