Clandestine removal does not avoid interest or mandatory penalty after prior duty payment; director's penalty needs clear involvement finding.

In admitted clandestine removal of excisable goods and imported raw materials, prior payment of duty before the show cause notice did not, by itself, exclude liability to interest or mandatory penalty, because the evasion was fraudulent and detected after the removals had already occurred. The Tribunal treated the cited authorities as fact-specific and sustained the interest demand and the penalties against the assessees, with only minor modification. However, a personal penalty on the director was not sustainable because there was no clear finding of his individual involvement in the clandestine removal; such penalty requires evidence and a recorded finding of participation in the offending acts.

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Issues: (i) Whether payment of duty before issuance of the show cause notice excluded liability to interest and mandatory penalty in cases of admitted clandestine removal. (ii) Whether the personal penalty on the director was sustainable in the absence of a clear finding of his involvement in the clandestine removal.

Issue (i): Whether payment of duty before issuance of the show cause notice excluded liability to interest and mandatory penalty in cases of admitted clandestine removal.

Analysis: The appellants had admittedly indulged in clandestine removal of excisable goods and imported raw materials. The Tribunal held that such conduct could not be treated on par with a genuine case of voluntary compliance. It noted that the statutory scheme under the Customs Act and the Central Excise Act did not exclude interest and penalty merely because duty had been paid before the issue of notice, particularly where the evasion was fraudulent and detected only after clandestine removal had taken place. The cited decisions were found distinguishable on facts, and the Tribunal accepted that the mandatory penal provisions were attracted on the established facts.

Conclusion: Liability to interest was upheld and mandatory penalty was sustained against the assessees.

Issue (ii): Whether the personal penalty on the director was sustainable in the absence of a clear finding of his involvement in the clandestine removal.

Analysis: The Tribunal found that there was no clear finding establishing the director's personal involvement in the clandestine removal. It held that a personal penalty on a director could not be imposed unless his participation in the offending acts was clearly recorded on the evidence.

Conclusion: The personal penalty on the director was set aside.

Final Conclusion: The duty and interest demands were maintained, the penalties on the two assessee-appellants were substantially upheld with minor modification, and the director was relieved from personal penalty.

Ratio Decidendi: In cases of admitted clandestine removal, prior payment of duty does not, by itself, bar interest or mandatory penalty, while personal penalty requires a clear finding of the individual's involvement.

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