Clandestine removal proved through account evidence led to unit penalty; director's penalty was reduced, while finance manager was exonerated.

Contemporaneous account evidence and buyer-wise corroboration established a pattern of routing sale proceeds through a separate account to conceal clearances and suppress turnover for small scale industry exemption, so clandestine removal and the unit's penalty were upheld. The director was found to have played a conscious role in the arrangement, but the penalty was reduced as excessive in the circumstances, so liability remained in principle with partial relief on quantum. The finance manager was treated as an employee without proof of a culpable role, so the penalty against him was set aside.

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Issues: (i) whether the appellant unit was liable to penalty for clandestine clearances and suppression of value of clearances so as to avail small scale industry exemption; (ii) whether the penalty imposed on the director was justified, and if so, to what extent; and (iii) whether the penalty imposed on the finance manager was sustainable.

Issue (i): whether the appellant unit was liable to penalty for clandestine clearances and suppression of value of clearances so as to avail small scale industry exemption.

Analysis: The deposits made through the director's bank account were found to tally with the clearances reflected in the buyers' accounts, and the pattern of transfer and re-deposit was treated as a device to camouflage unaccounted sales. The unit failed to correlate the full value of clearances, and the duty demand was accepted as just and proper. On these facts, the activity of clandestine clearances was held to be established.

Conclusion: The penalty on the appellant unit was upheld and no interference was called for.

Issue (ii): whether the penalty imposed on the director was justified, and if so, to what extent.

Analysis: The director was found to have played a conscious role in the arrangement used for routing sale proceeds. However, the quantum of penalty imposed on him was considered excessive in the circumstances and was reduced to a lesser amount to meet the ends of justice.

Conclusion: The director's penalty was sustained in principle but reduced in amount.

Issue (iii): whether the penalty imposed on the finance manager was sustainable.

Analysis: The finance manager was treated only as an employee and not as a person shown to have a culpable role warranting penalty on the facts established.

Conclusion: The penalty on the finance manager was set aside.

Final Conclusion: The duty-related findings and the unit's penalty were maintained, the director obtained partial relief by reduction of penalty, and the finance manager obtained full relief from penalty.

Ratio Decidendi: Where contemporaneous account evidence and buyer-wise corroboration establish a pattern of routing sale proceeds through a separate account to conceal clearances, clandestine removal and related penal consequences may be upheld, while individual penalties must still be tested on the specific role and culpability of each noticee.

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