Clandestine removal proved by private records and statements; Section 11AC penalty and director liability under Rule 209A follow.

Clandestine removal of excisable goods may be established through mutually corroborative private registers, duplicate production and raw material records, delivery challans, and admissions in statements when the statutory records do not reflect clearances. On that basis, penalty under Section 11AC is attracted once duty evasion is proved, and appellate relief may permit reduction to 25% if the required duty and reduced penalty are paid within the stipulated time where such benefit is available. Directors can also face personal penalty under Rule 209A when their statements and surrounding evidence show that the illicit clearances were undertaken under their instructions.

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Issues: (i) Whether clandestine removal of excisable goods was established on the basis of private registers, duplicate production records, delivery challans and statements; (ii) whether penalty equal to duty under Section 11AC was sustainable with an option to reduce it on timely payment; and (iii) whether the directors were liable to penalty under Rule 209A.

Issue (i): Whether clandestine removal of excisable goods was established on the basis of private registers, duplicate production records, delivery challans and statements

Analysis: The seized private registers were found to be meticulously maintained and contained complete dispatch particulars. Their contents were corroborated by duplicate sets of daily production and raw material reports for different periods, as well as delivery challans showing clearances not reflected in statutory records. The statements recorded during investigation, including those of the supervisor and the directors, further supported the conclusion that goods had been manufactured and cleared without payment of duty.

Conclusion: Clandestine removal was proved.

Issue (ii): whether penalty equal to duty under Section 11AC was sustainable with an option to reduce it on timely payment

Analysis: Once clandestine removal and duty evasion stood established, penalty under Section 11AC followed. At the same time, the Tribunal applied the principle recognised in its precedent that where the lower authority had not extended the statutory payment option, the appellate forum could grant the benefit of reduced penalty if the assessee paid the duty dues and 25% of the penalty within the stipulated time.

Conclusion: Penalty equal to duty was sustained, with an option to reduce it to 25% on timely compliance.

Issue (iii): whether the directors were liable to penalty under Rule 209A

Analysis: The directors' own statements, along with the supervisor's statement, showed that the clandestine activity was undertaken under their instructions. This was sufficient to attract personal penal liability under the rule governing persons concerned with the offending goods.

Conclusion: The directors were liable to penalty under Rule 209A.

Final Conclusion: The demand of duty and the principal penalty were upheld, the directors' penalties were sustained, and only a limited benefit regarding reduction of the penalty on prompt payment was granted.

Ratio Decidendi: Clandestine removal can be established by mutually corroborative private records, parallel production documents, delivery challans and admissions in statements, and once proved, penalty under Section 11AC follows with limited appellate discretion to extend the statutory reduced-penalty benefit where permissible.

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