Corroborated evidence of clandestine removal supports extended limitation, while later interest provisions cannot apply retrospectively.

Corroborated statements recorded during investigation can sustain a finding of clandestine removal and keep the extended limitation period available even where some documents were earlier known to the department. The processor's penalty was maintained, the chairman-cum-managing director's penalty was reduced, and confiscation of land, building and major plant assets was held disproportionate and set aside. Interest under Section 11AB of the Central Excise Act, 1944 could not be levied for clearances made before its introduction, so the revenue claim for interest failed.

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Issues: (i) whether the demand for duty was barred by limitation on the ground that the relevant facts were already within the department's knowledge; (ii) whether penalty on the processor and the chairman-cum-managing director was sustainable and whether confiscation of land, plant, building and machinery was warranted; and (iii) whether interest under Section 11AB of the Central Excise Act, 1944 could be imposed for clandestine removals made before its introduction.

Issue (i): Whether the demand for duty was barred by limitation on the ground that the relevant facts were already within the department's knowledge.

Analysis: The notice was based not merely on invoices and delivery challans but also on statements of merchant manufacturers recorded during investigation, which corroborated clandestine removal through kachcha delivery challans. Although some documents had been recovered earlier, the material facts were completed only after verification and corroboration, and the investigation was then finalised for issuing the detailed notice.

Conclusion: The demand was not barred by limitation and the plea of time-bar failed.

Issue (ii): Whether penalty on the processor and the chairman-cum-managing director was sustainable and whether confiscation of land, plant, building and machinery was warranted.

Analysis: The finding of clandestine removal was upheld. The duty demands already recovered from merchant manufacturers did not extinguish the remaining confirmed liability. The processor's penalty was maintained, but the confiscation of immovable and major plant assets was considered disproportionate. The penalty on the chairman-cum-managing director was reduced in view of the overall circumstances.

Conclusion: Penalty on the processor was sustained, the chairman-cum-managing director's penalty was reduced, and confiscation of land, plant, building and machinery was set aside.

Issue (iii): Whether interest under Section 11AB of the Central Excise Act, 1944 could be imposed for clandestine removals made before its introduction.

Analysis: The offence related to a period prior to September 1996, when Section 11AB had not yet been introduced. The Board's circular also clarified that the provision could be invoked only for clearances effected after 28-9-1996.

Conclusion: Interest under Section 11AB was not recoverable for the relevant period and the Revenue's claim failed.

Final Conclusion: The duty demands were upheld, the principal penalty was sustained with partial modification, confiscation was disallowed, and the Revenue's appeal for interest was rejected.

Ratio Decidendi: Where clandestine removal is supported by corroborative statements collected during investigation, the extended period of limitation is available; and interest provisions introduced later cannot be applied retrospectively to clearances made before their commencement.

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