Clandestine removal and penalty relief: duty demand sustained, but balance penalty and partner penalty were deleted.

Clandestine removal was proved through stock shortage, non-accountal in RG-1, admissions by concerned persons, and corroborative statements from recipients, so the duty demand was upheld. The proviso to section 11AC required deletion of the balance penalty where duty, interest, and 25% of the penalty were paid within thirty days of communication of the order, so the remaining 75% penalty on the firm was set aside. Personal penalty on the partner under rule 209A was also held unsustainable on the facts, so that penalty was deleted.

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Issues: (i) whether the demand of duty on alleged clandestine removal of processed MMF(P) was sustainable; (ii) whether the penalty imposed on the firm under the proviso to section 11AC was required to be reduced in view of payment of duty, interest, and 25% penalty within the prescribed time; and (iii) whether separate personal penalty on the partner under rule 209A was maintainable.

Issue (i): whether the demand of duty on alleged clandestine removal of processed MMF(P) was sustainable.

Analysis: The record showed shortage of goods, non-accountal in RG-1, statements of the concerned persons admitting illicit removal, and supporting statements from recipients of the goods. The evidentiary material was treated as sufficient to sustain the finding of clandestine removal and duty evasion.

Conclusion: The demand of duty on clandestinely removed goods was upheld, against the assessee.

Issue (ii): whether the penalty imposed on the firm under the proviso to section 11AC was required to be reduced in view of payment of duty, interest, and 25% penalty within the prescribed time.

Analysis: The proviso to section 11AC was applied on the footing that where duty, interest, and 25% of the penalty are paid within thirty days from communication of the order determining duty, the balance penalty is not leviable. Since proof of such payment within time was produced, the remaining 75% penalty could not survive.

Conclusion: The balance penalty on the firm was set aside, in favour of the assessee.

Issue (iii): whether separate personal penalty on the partner under rule 209A was maintainable.

Analysis: Relying on Tribunal precedent, the partnership firm and its partner were treated as not warranting separate penal treatment on the facts of the case, and personal penalty on the partner was found unsustainable.

Conclusion: The personal penalty on the partner was set aside, in favour of the assessee.

Final Conclusion: The duty demand on clandestine removal was sustained, but the balance penalty on the firm and the partner's personal penalty were deleted, resulting in a partial success for the assessee.

Ratio Decidendi: Clandestine removal can be sustained on admission and corroborative evidence, but the statutory concession in the proviso to section 11AC mandates deletion of the balance penalty when duty, interest, and 25% of the penalty are paid within the stipulated period, and separate personal penalty on a partner is not justified where the partnership is treated as the operative penal entity on the facts found.

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