Clandestine removal, cum-duty valuation, and mandatory penalty under central excise law were applied with limited relief on prompt payment.

Evidence such as delivery challans, admissions by the assessee's representative and a merchant manufacturer's statement can support a finding of clandestine removal and sustain duty demand even without statutory invoices or records. A limitation objection may fail where the Tribunal applies settled legal principles against the assessee. Cum-duty valuation is unavailable where the realised price is not shown to have included duty, so the department's assessable value may be sustained. Penalty under the central excise framework may remain mandatory at 100% of the duty evaded, while the assessee may still obtain the statutory option to reduce the penalty to 25% on prompt payment within the permitted period.

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Issues: (i) Whether the demand of duty was sustainable on the basis of clandestine removal and whether the show cause notice was barred by limitation. (ii) Whether the assessable value required re-quantification by treating the entire realisation as cum-duty price. (iii) Whether penalty equivalent to 100% of the duty was leviable under Section 11AC of the Central Excise Act, 1944 and whether the assessee was entitled to the option of reduced penalty on prompt payment.

Issue (i): Whether the demand of duty was sustainable on the basis of clandestine removal and whether the show cause notice was barred by limitation.

Analysis: Recovery of delivery challans, the assessee's representative's admission, and the merchant manufacturer's statement were treated as sufficient evidence of clandestine clearance without statutory invoices or records. The limitation objection was rejected in view of the settled legal position applied by the Tribunal against the assessee.

Conclusion: The demand of duty on account of clandestine removal was upheld and the limitation plea failed.

Issue (ii): Whether the assessable value required re-quantification by treating the entire realisation as cum-duty price.

Analysis: The value adopted for assessment was based on the assessee's own disclosure and acceptance. The clearances were found to have been made without payment of duty, and the price realised was not shown to include duty. In such a case, the basis for invoking cum-duty valuation was held to be absent.

Conclusion: Re-quantification on cum-duty basis was ed and the assessable value adopted by the department was sustained.

Issue (iii): Whether penalty equivalent to 100% of the duty was leviable under Section 11AC of the Central Excise Act, 1944 and whether the assessee was entitled to the option of reduced penalty on prompt payment.

Analysis: In light of the law applied on mandatory penalty under Section 11AC, the penalty could not be reduced below 100% of the duty evaded and the objection based on apportionment between provisions was rejected. At the same time, the assessee was held entitled to the statutory option of reduced penalty if the dues and 25% penalty were paid within the permitted period.

Conclusion: The penalty was upheld at 100% of duty, with the assessee granted the option to reduce it to 25% on timely compliance.

Final Conclusion: The duty demand and penalty were sustained, but the assessee was given a limited benefit of reduced penalty on fulfilment of the stated condition, resulting in only partial relief.

Ratio Decidendi: Evidence of clandestine removal supported by admissions and recovered records can sustain duty demand, cum-duty valuation is unavailable where the realised price is not shown to include duty, and penalty under Section 11AC of the Central Excise Act, 1944 is mandatory subject to the statutory option of reduced payment on timely compliance.

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