Clandestine clearance and cum-duty benefit: no duty-inclusive price, limited recomputation for slab exemption, partner penalty set aside.

Cum-duty benefit is not available for clandestine clearances made without invoices and without payment of duty, because the actual sale realisation cannot be treated as a duty-inclusive price. The duty computation, however, must be revisited for limited application of the slab-based exemption notifications, with any reduction in demand carrying a corresponding revision of the penalty. Where the partnership firm and the fictitious firm were controlled by the same person and no distinct role of other partners was shown, a separate personal penalty on the partner was unnecessary and was set aside. Confiscation of unregistered, unaccounted goods and the associated redemption fine were upheld as justified.

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Issues: (i) whether cum-duty benefit was admissible in respect of clandestinely removed goods cleared without invoices and whether the duty demand and penalty under Section 11AC required reconsideration on account of slab-based exemption under the notifications; (ii) whether separate penalty on the partner was sustainable when the business of the partnership firm and the fictitious firm was run by the same person; and (iii) whether confiscation of the goods and redemption fine were justified.

Issue (i): whether cum-duty benefit was admissible in respect of clandestinely removed goods cleared without invoices and whether the duty demand and penalty under Section 11AC required reconsideration on account of slab-based exemption under the notifications

Analysis: The removal of goods manufactured by the assessee using invoices of a fictitious firm stood admitted. For clandestine clearances made without issuing invoices and without payment of duty, the actual sale realisation cannot be treated as cum-duty price. At the same time, the duty calculation was required to be revisited for the limited purpose of applying the slabs contemplated by the exemption notifications and, if the demand was reduced, the corresponding penalty was also to be revised.

Conclusion: Cum-duty benefit was rejected, but the duty demand and consequential penalty were remanded for limited recomputation.

Issue (ii): whether separate penalty on the partner was sustainable when the business of the partnership firm and the fictitious firm was run by the same person

Analysis: The record showed that the affairs of both entities were controlled by the same individual, while no distinct role of the other partners was established. In those circumstances, the penalty already imposed on the partnership firm was considered sufficient, and an additional personal penalty on the partner was found unnecessary.

Conclusion: The separate penalty on the partner was set aside.

Issue (iii): whether confiscation of the goods and redemption fine were justified

Analysis: The goods were manufactured without registration and were not accounted for in the statutory records. On those facts, confiscation and redemption fine were held to be appropriate and not excessive.

Conclusion: Confiscation and redemption fine were upheld.

Final Conclusion: The partner obtained complete relief from the personal penalty, while the assessee succeeded only to the limited extent of securing a remand for recomputation of duty and consequential penalty; the confiscation-related relief was declined.

Ratio Decidendi: Cum-duty benefit is not available for clandestine clearances effected without invoices and without payment of duty, and a separate personal penalty may be dispensed with where the firm penalty sufficiently covers the misconduct on the proved facts.

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