Clandestine removal evidence upheld where weighment slips and statements contradicted explanations for alleged coal ash and machinery clearances.

Contemporaneous weighment slips, recorded statements and surrounding records were treated as evidence of clandestine removal because they showed roll clearances with truck numbers, dates and quantities that did not match the assessee's later explanations. The plea that 35 slips related to coal ash was rejected for lack of payment records, transporter details or corroborative accounts, and the duty demand based on those slips was sustained. The explanation that 4 slips related to old machinery was also rejected for want of duty documents or job work challans, and the related demand was upheld. On that footing, penalty under Section 11AC was sustained, with an option to reduce it to 25% on timely compliance, and the personal penalties were also maintained.

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Issues: (i) Whether the 35 weighment slips could be excluded on the plea that they evidenced removal of coal ash and not finished kraft paper. (ii) Whether the 4 weighment slips could be excluded on the plea that they related to clearance of old machinery. (iii) Whether the penalty under Section 11AC and the personal penalties on the managing director and excise assistant were sustainable.

Issue (i): Whether the 35 weighment slips could be excluded on the plea that they evidenced removal of coal ash and not finished kraft paper.

Analysis: The slips recovered from the factory, read with the statements recorded during investigation, supported clandestine clearance. The lower authorities found specific slips showing removal of rolls, truck numbers, dates and quantities inconsistent with the coal ash explanation. The invoices and bills produced later did not tally with the recovered slips and appeared to be prepared as an afterthought. No satisfactory supporting evidence such as payment records, transporter particulars or corroborative account entries was produced.

Conclusion: The plea that the 35 slips related to coal ash was rejected and the duty demand based on those slips was sustained.

Issue (ii): Whether the 4 weighment slips could be excluded on the plea that they related to clearance of old machinery.

Analysis: The records did not show any duty-paying documents, job work challans, or other evidence consistent with lawful removal of capital goods. The statements already admitted clearance of finished goods under the cover of the slips, and the explanation for machinery removal was unsupported.

Conclusion: The explanation regarding old machinery was rejected and the demand relatable to the 4 slips was upheld.

Issue (iii): Whether the penalty under Section 11AC and the personal penalties on the managing director and excise assistant were sustainable.

Analysis: Since clandestine removal was established, penalty equal to duty was attracted. The Tribunal also considered that a reduced penalty option could be granted if the prescribed amount was paid within the stipulated period. The personal penalties were supported by the recorded statements showing involvement in the evasion.

Conclusion: The penalty under Section 11AC was upheld with an option to reduce it to 25% on timely compliance, and the personal penalties were sustained.

Final Conclusion: The demand was sustained to the extent upheld by the Tribunal, the assessee obtained limited relief on penalty modulation, and the connected appeals were disposed of accordingly.

Ratio Decidendi: A plea to exclude alleged clearances from clandestine-removal evidence must fail where contemporaneous slips, statements, and surrounding records contradict the explanation and no reliable corroborative proof is produced; once clandestine removal is established, penalty under Section 11AC follows and individual penalties may also be sustained on evidence of participation.

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