Intermediate goods may still attract excise duty where processing amounts to manufacture, and penalties for clandestine removal were upheld.

Intermediate goods can remain excisable where the processing amounts to manufacture, even if they move between units as semi-finished products; on the stated facts, removal without payment of duty was treated as clandestine and the claimed benefit of Rule 56-B was unavailable because the required supporting order and conditions were not shown. Penalties on persons managing the concern were sustained where they were involved in the duty evasion, and the amounts were not found to be shockingly disproportionate. The challenge to excisability, clandestine removal, and penalty therefore failed.

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Issues: (i) whether the goods removed from one unit to another were non-excisable semi-finished goods so as to escape central excise duty and liability under the penal provision, and whether the benefit of Rule 56-B was available; (ii) whether the penalty imposed on the persons managing the concern for clandestine removal of excisable goods was unreasonably excessive or shockingly disproportionate.

Issue (i): whether the goods removed from one unit to another were non-excisable semi-finished goods so as to escape central excise duty and liability under the penal provision, and whether the benefit of Rule 56-B was available.

Analysis: The removal of seven gate-pass consignments and the duplicate gate passes was found to be without payment of duty. The contention that the goods were only semi-finished and therefore not excisable was rejected on the basis that drawing aluminium wires from solid aluminium amounts to manufacture, and that each stage of processing may attract duty with the aid of CENVAT credit. The claimed benefit of Rule 56-B was also unavailable because no supporting order of the Commissioner was shown and the factual setting did not satisfy the rule's requirements.

Conclusion: The goods were excisable and were clandestinely removed without payment of duty. The plea based on semi-finished character and Rule 56-B failed.

Issue (ii): whether the penalty imposed on the persons managing the concern for clandestine removal of excisable goods was unreasonably excessive or shockingly disproportionate.

Analysis: The penalties were sustained because the company had removed excisable goods without duty, and persons in day-to-day management of the concern could also be visited with penalty for such evasion. The quantum was assessed against the extent of evasion and the factual findings already recorded by the adjudicating authority and the appellate tribunal. No infirmity was found in the amount imposed on each appellant.

Conclusion: The penalty on each appellant was upheld as just and proper and not disproportionate.

Final Conclusion: The challenge to the findings on excisability, clandestine removal, and penalty failed, and the tax appeals were dismissed.

Ratio Decidendi: Goods emerging at an intermediate stage can still be excisable if the process amounts to manufacture, and persons responsible for clandestine removal of such goods may be penalised where the penalty is commensurate with the evasion proved.

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