Clandestine removal established; duty and mandatory penalty sustained, but interest and extra rule-based penalties were set aside.

Corroborated admissions, stock shortage and supporting employee evidence established clandestine removal of resin, so the duty demand was sustained against the assessee. Interest under Section 11AB was set aside because the duty had become payable before that provision applied in the manner relevant to the case and the corresponding rule was not then in force. The penalty under Section 11AC was upheld as mandatory, but no additional penalty under Rules 173Q and 226 was justified on top of that penalty. The appeal succeeded only to the limited extent of deleting interest and the extra rule-based penalties.

---

---

Issues: (i) Whether the duty demand on account of clandestine removal of inputs was sustainable; (ii) Whether interest and the additional penalties imposed under the cited provisions were sustainable.

Issue (i): Whether the duty demand on account of clandestine removal of inputs was sustainable.

Analysis: The duty demand was founded on shortage detection, the partner's statement admitting clandestine removal of resin, corroboration by another employee, and a written confirmation by the partner. The explanation offered against the demand was found unsatisfactory.

Conclusion: The duty demand was sustained against the assessee.

Issue (ii): Whether interest and the additional penalties imposed under the cited provisions were sustainable.

Analysis: Interest under Section 11AB was held inapplicable because the duty had become payable before the relevant date on which that provision took effect in the manner applicable to the case, and the corresponding rule was not in force when the adjudication order was passed. The penalty under Section 11AC was upheld as mandatory, but no further penalty under the remaining rules was justified over and above that penalty.

Conclusion: Interest was set aside, the penalty under Section 11AC was sustained, and the penalties under Rules 173Q and 226 were set aside.

Final Conclusion: The appeal succeeded only to the extent of deleting interest and the additional rule-based penalties, while confirming the duty demand and the penalty under Section 11AC.

Ratio Decidendi: Where clandestine removal is established by corroborated admissions and supporting evidence, the duty demand is sustainable; however, interest and multiple penalties cannot be imposed beyond the statutory and temporal limits applicable to the case.

---