Clandestine removal evidence upheld duty demand, while an unspecified penalty clause under Rule 173Q was set aside.

Clandestine removal was found proved on photocopies of invoices and transporter records, so the central excise duty demand was upheld despite the invoices not being recovered from the assessee's premises. Penalty under Rule 173Q was set aside because the adjudication and appellate orders did not specify the exact contravened clause, applying the principle that a penalty cannot stand without a clear foundational allegation. Penalty under Section 11AC was sustained because non-payment of duty on cleared goods attracted the statutory conditions. The personal penalty on the Director under Rule 209A was moderated and reduced.

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Issues: (i) whether the demand of central excise duty on alleged clandestine removal of goods was sustainable; (ii) whether the penalty under Rule 173Q of the Central Excise Rules was sustainable where the particular clause allegedly contravened was not specified; (iii) whether the penalty under Section 11AC of the Central Excise Act was liable to be interfered with; and (iv) whether the penalty imposed on the Director under Rule 209A of the Central Excise Rules required reduction.

Issue (i): whether the demand of central excise duty on alleged clandestine removal of goods was sustainable.

Analysis: The demand was based on photocopies of invoices and transporter records showing movement of goods, while the corresponding clearances were absent from the statutory records. The challenge that the invoices were not recovered from the appellant's premises did not dislodge the evidentiary value of the materials relied upon by the Revenue.

Conclusion: The duty demand was upheld against the assessee.

Issue (ii): whether the penalty under Rule 173Q of the Central Excise Rules was sustainable where the particular clause allegedly contravened was not specified.

Analysis: The order of adjudication as well as the appellate order did not specify the precise clause of Rule 173Q alleged to have been contravened. In such a situation, the penalty could not be sustained in view of the principle applied by the Supreme Court in Amrit Foods.

Conclusion: The penalty under Rule 173Q was set aside in favour of the assessee.

Issue (iii): whether the penalty under Section 11AC of the Central Excise Act was liable to be interfered with.

Analysis: Once the goods were found to have been cleared without payment of duty, the statutory conditions for the penalty under Section 11AC stood attracted on the facts found by the Tribunal.

Conclusion: The penalty under Section 11AC was sustained against the assessee.

Issue (iv): whether the penalty imposed on the Director under Rule 209A of the Central Excise Rules required reduction.

Analysis: Considering the facts and circumstances recorded in the order, the Tribunal found that the personal penalty on the Director deserved moderation rather than complete interference.

Conclusion: The penalty on the Director was reduced to Rs. 25,000.

Final Conclusion: The demand and the penalty under Section 11AC were maintained, the penalty under Rule 173Q was annulled, and the personal penalty on the Director was reduced.

Ratio Decidendi: A penalty provision that requires specification of the exact contravened clause cannot be sustained when that foundational allegation is omitted, even though the duty demand and other statutory penalties based on proved clandestine clearance may still survive on the evidence.

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