Clandestine removal proved by seized records and admission, with duty sustained subject to reduction and additional penalty set aside.

Private records seized from the assessee's premises, supported by the admission of its representative, were sufficient to establish clandestine removal; the statutory presumption under Section 36A of the Central Excise Act, 1944 applied and was not rebutted, so the duty demand and interest were sustained, subject to reduction for the portion of duty already shown as paid. The plea of breach of natural justice failed because several hearing opportunities had been given and no prejudice was shown, so absence of a further personal hearing did not vitiate the adjudication. Penalty for clandestine removal was upheld but reduced, while the additional penalty under Rule 173Q(1) of the Central Excise Rules, 1944 was set aside.

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Issues: (i) Whether denial of personal hearing or reliance on documents not separately supplied vitiated the adjudication on the ground of breach of natural justice. (ii) Whether clandestine clearances were proved so as to sustain duty demand and penalty, and whether the penalties required modification.

Issue (i): Whether denial of personal hearing or reliance on documents not separately supplied vitiated the adjudication on the ground of breach of natural justice.

Analysis: Several opportunities of hearing had been afforded and were not availed of. The challenge based on absence of personal hearing therefore did not show prejudice. The documents relied on for confirming the duty demand on clandestine removals were the private note book recovered from the factory and the admission of the power of attorney holder that the entries were made by him. The other documents related mainly to seized or detained goods with which the assessee was not concerned for the limited duty demand upheld against it.

Conclusion: The plea of breach of natural justice was rejected.

Issue (ii): Whether clandestine clearances were proved so as to sustain duty demand and penalty, and whether the penalties required modification.

Analysis: The seized note book recovered from the factory premises carried a statutory presumption of genuineness under Section 36A of the Central Excise Act, 1944, and that presumption was reinforced by the admission of the assessee's representative. The assessee failed to rebut the material showing clearances without duty payment. At the same time, the demand had to be reduced to the extent of duty already shown to have been paid on a part of the clearances. Penalty for clandestine removal was justified, but the quantum called for reduction, and the additional penalty under Rule 173Q(1) was not sustained.

Conclusion: Clandestine removal was proved, the duty demand and interest were sustained subject to reduction, the penalty under Section 11AC of the Central Excise Act, 1944 was reduced, and the penalty under Rule 173Q(1) of the Central Excise Rules, 1944 was set aside.

Final Conclusion: The assessee succeeded only to the limited extent of reduction of duty and penalty, while the core finding of clandestine clearances was upheld.

Ratio Decidendi: Private records seized from the assessee's premises, when supported by an admission connecting the entries to the assessee, can establish clandestine removal; the statutory presumption as to such documents must be rebutted by the assessee, and where no prejudice is shown, absence of personal hearing does not vitiate the adjudication.

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