Personal penalty for clandestine clearances upheld where director's knowledge and involvement were proved, with quantum reduced

Personal penalty under Rule 209A of the Central Excise Rules, 1944 was found sustainable where evidence showed a director's knowledge of and involvement in clandestine clearance of excisable goods through parallel invoices and destruction of invoices after clearance. The shortage of finished goods was undisputed, and statements of the excise clerk and the director supported the finding of active participation under the directions of the directors. The objection based on denial of cross-examination failed because no request had been made before the adjudicating authority. Penalty was upheld, but the quantum was reduced in view of the company already suffering equal penalty and the absence of proved monetary gain to the director.

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Issues: Whether personal penalty under Rule 209A of the Central Excise Rules, 1944 was sustainable against a director who was found to have knowledge of and in clandestine clearance of excisable goods, and if so, whether the penalty required reduction.

Analysis: The shortage of finished goods found on search was not disputed. The evidence included statements of the excise clerk and the appellant, both of which showed clearance of goods without payment of duty under the directions of the directors and disclosure of the modus operandi involving parallel invoices and destruction of such invoices after clearance. The plea that cross-examination was denied did not assist the appellant, as no request for cross-examination had been made before the adjudicating authority. On the evidence, the appellant's involvement was established so as to attract penal liability under Rule 209A. At the same time, the Tribunal took note that equal penalty had already been imposed on the company and that the appellant had claimed no monetary gain from the removals.

Conclusion: The penalty under Rule 209A was upheld, but the quantum was reduced to Rs. 2.50 lakhs.

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