Penalty for undocumented demonstration removals sustained where clearances were not recorded and duty was not paid.

Penalty under Section 11AC of the Central Excise Act, 1944 was sustained where goods were removed to another unit on a returnable basis for demonstration without payment of duty and without proper records. The removals were not entered in statutory records or ER-1 returns, and the absence of documentation meant the clearances would not have been detected but for departmental investigation. The explanation that the removals were only for demonstration and carried no intent to evade duty was rejected on these facts, and the ingredients for invoking the penal provision were treated as established.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable for removal of goods for demonstration purposes without payment of duty and without maintenance of records.

Analysis: The appellant cleared goods to another unit for demonstration on a returnable basis, but maintained no proper records of such removals or of the receipt back of the goods. The removals were also not reflected in the statutory records or ER-1 returns. The absence of records meant that the clearances would not have come to light but for departmental investigation. On these facts, the explanation that the removals were only for demonstration and without intent to evade duty was not accepted. The ingredients for invoking the penal provision were treated as established.

Conclusion: Penalty under Section 11AC of the Central Excise Act, 1944 was rightly imposed and sustained against the assessee.

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