Unretracted admission of clandestine removal sustained excise duty and penalty, while the director's penalty was reduced.

An unretracted director's statement admitting clandestine removal of raw materials and finished goods, supported by stock shortages and unaccounted cash sales without invoices, was treated as sufficient evidence to sustain central excise duty, interest and penalty on the assessee. The relief already granted under Section 11AC was noted, and the substantive demand was maintained. The director's own involvement justified penalty under the Central Excise Rules, 2004, but the original penalty was found disproportionate on the facts and was reduced to a lower amount.

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Issues: (i) Whether the confirmed demand of central excise duty, interest and penalty on the assessee was sustainable on the basis of the director's unretracted statement admitting clandestine removal of raw materials and finished goods; (ii) whether the penalty imposed on the director under the Central Excise Rules, 2004 required reduction.

Issue (i): Whether the confirmed demand of central excise duty, interest and penalty on the assessee was sustainable on the basis of the director's unretracted statement admitting clandestine removal of raw materials and finished goods.

Analysis: The director's statement recorded the shortages noticed during stock verification and expressly ed that the goods found short had been sold in the open market for cash without invoices, without accounting in the unit's records and without payment of duty. The statement was not retracted at any stage. On these facts, the evidence was treated as sufficient to establish clandestine removal of both raw materials and finished goods. The relief already granted by the first appellate authority under Section 11AC was noted, and no infirmity was found in sustaining the duty, interest and reduced penalty on the assessee.

Conclusion: The duty demand, interest and penalty on the assessee were upheld.

Issue (ii): Whether the penalty imposed on the director under the Central Excise Rules, 2004 required reduction.

Analysis: The director had accepted his role in the clandestine clearance, making him liable to penalty. However, the penalty of Rs.50,000 was considered disproportionate in the facts of the case when compared with the duty confirmed against the assessee-company. The penalty was therefore moderated to meet the ends of justice.

Conclusion: The penalty on the director was reduced to Rs.25,000.

Final Conclusion: The appeals were disposed of with the assessee's substantive duty liability maintained and the director's penalty reduced.

Ratio Decidendi: An unretracted admission of clandestine removal can sustain excise duty, interest and penalty, while the quantum of penalty on an individual accessory may be reduced where it is found disproportionate to the facts and the main demand.

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