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Issues: (i) Whether the demand of duty and penalty were sustainable on the basis of the assessee's admitted shortage, statements of the authorised signatory, and surrounding circumstances indicating clandestine removal; (ii) Whether confiscation of the excess found fabrics was justified in the absence of evidence of intended illicit clearance.
Issue (i): Whether the demand of duty and penalty were sustainable on the basis of the assessee's admitted shortage, statements of the authorised signatory, and surrounding circumstances indicating clandestine removal.
Analysis: The shortage of finished processed fabrics stood admitted in the panchnama and the authorised signatory's statements recorded on two occasions consistently ed clearance of goods in the open market against cash. The statements were neither retracted nor shown to be incorrect. Voluntary payment of part of the duty further supported the department's case. On these facts, independent corroboration from buyers was not necessary, and the inference of clandestine removal was duly supported by the record.
Conclusion: The demand of duty was restored and the penalty was sustained, though the penalty amount was reduced.
Issue (ii): Whether confiscation of the excess found fabrics was justified in the absence of evidence of intended illicit clearance.
Analysis: A part of the goods was under process and only part was finished fabric. There was no evidence that the seized fabrics were intended for removal without payment of duty. Mere suspicion arising from earlier clandestine removals could not replace proof of intended illicit clearance.
Conclusion: The confiscation of the seized goods was not justified and was set aside.
Final Conclusion: The Revenue's appeal succeeded on the duty demand and partly on penalty, but failed on confiscation of the seized fabrics.
Ratio Decidendi: An unretracted and consistent admission of clandestine clearance, supported by admitted shortages and voluntary duty payment, can sustain a demand for duty and penalty even without buyer-wise corroboration, but confiscation of seized goods requires evidence of intended illicit clearance and cannot rest on suspicion alone.
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