Clandestine removal and applicable penalty provision upheld, with duty confirmed and company penalty reduced on the facts

Unretracted admission by the authorised signatory, corroborated by the record, was sufficient to sustain a finding of clandestine removal, so the duty demand was confirmed. Penalty could not be imposed under Section 11AC for a period when that provision was not in force; the penal consequence was sustained only under the applicable erstwhile Rule 173Q. The company's penalty was reduced on the facts, while the personal penalty on the authorised signatory was maintained because his statement directly implicated the illicit clearances.

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Issues: (i) Whether the goods were clandestinely removed so as to sustain the duty demand; (ii) whether equivalent penalty could be imposed under Section 11AC for a period when that provision was not in force; (iii) whether the penalty on the company and the personal penalty on the authorised signatory required interference.

Issue (i): Whether the goods were clandestinely removed so as to sustain the duty demand.

Analysis: The un-retracted statement of the authorised signatory admitted illicit clearance of goods from the factory. The statement was supported by the record and there was no contrary evidence sufficient to displace the finding recorded by the lower authorities.

Conclusion: The finding of clandestine removal and the duty demand were sustained.

Issue (ii): Whether equivalent penalty could be imposed under Section 11AC for a period when that provision was not in force.

Analysis: The penalty had been imposed invoking Rule 173Q read with Section 11AC, but Section 11AC was not in existence during the relevant period. Equitable relief was warranted while maintaining penal consequences under the applicable erstwhile rule.

Conclusion: Penalty under Section 11AC was held inapplicable, and penalty was sustained only under Rule 173Q of the erstwhile Central Excise Rules, 1944.

Issue (iii): Whether the penalty on the company and the personal penalty on the authorised signatory required interference.

Analysis: The company remained liable for penalty for clandestine removal, but the quantum imposed on it was reduced on the facts. The personal penalty on the authorised signatory was considered justified because his statement remained un-retracted and directly implicated the illicit removals.

Conclusion: The company's penalty was reduced to Rs. 2,50,000, and the personal penalty of Rs. 20,000 was maintained.

Final Conclusion: The duty demand was confirmed, the statutory basis for equivalent penalty under Section 11AC was rejected for the relevant period, the company's penalty was reduced under the applicable erstwhile rule, and the personal penalty was upheld.

Ratio Decidendi: An unretracted admission by an authorised signatory, supported by the surrounding record, is sufficient to sustain a finding of clandestine removal, while penalty must be imposed only under the provision applicable during the relevant period.

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