Clandestine removal proved by admissions and stock shortage, with duty sustained and reduced-penalty relief allowed for the company.

Clandestine removal of POY was treated as established where stock shortage was found and both the Executive Director and the buyer admitted clearance and receipt of goods on cash basis without duty or invoices; those unretacted admissions were sufficient without further corroboration. The duty demand was therefore sustained. Penalty on the company was upheld in principle as mandatory, but the appellate forum could extend the statutory option to pay reduced penalty where the original order omitted it, resulting in relief if timely compliance was made. Individual noticees were found knowingly involved in goods liable to confiscation, so penalties were justified, but the quantum was reduced.

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Issues: (i) Whether the duty demand based on alleged clandestine removal of POY was sustainable; (ii) whether the penalties on the company and the individual noticees required interference, including grant of option to pay reduced penalty and reduction in quantum of penalties.

Issue (i): Whether the duty demand based on alleged clandestine removal of POY was sustainable.

Analysis: Shortage of stock was detected during physical verification. The Executive Director admitted that the goods had been cleared without payment of duty to the buyer, and the buyer also admitted receipt of the goods on cash basis without duty and without invoices. These admissions, not being retracted, sufficiently established clandestine removal. In such circumstances, the Revenue was not required to produce further corroboration.

Conclusion: The duty demand was upheld against the assessee.

Issue (ii): Whether the penalties on the company and the individual noticees required interference, including grant of option to pay reduced penalty and reduction in quantum of penalties.

Analysis: The penalty equivalent to duty on the company was sustained in principle in view of the settled position on mandatory penalty. However, since the lower authorities had not extended the statutory option to pay duty and reduced penalty within the prescribed time, the higher forum could grant that benefit. As regards the individual noticees, their admissions showed knowing involvement in dealing with goods liable to confiscation, so penalty was justified, though the quantum warranted reduction considering the circumstances.

Conclusion: The penalty on the company was upheld with an option to reduce it to 25% on timely compliance, and the individual penalties were reduced.

Final Conclusion: The duty demand and penalties were substantially sustained, but limited relief was granted by allowing the reduced-penalty option for the company and by lowering the penalties on the individual noticees.

Ratio Decidendi: Clandestine removal may be established from consistent admissions by both seller and buyer, supported by stock shortage, and a higher appellate forum may extend the benefit of reduced penalty where the original order omitted that option.

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