Documentary proof of disputed clearances upheld duty demand, while equal penalty was set aside for insufficient penal foundation.

Duty and interest on alleged clearances of samples, demonstration goods, and short-supplied goods were sustained because the assessee did not satisfactorily prove return, accounting, or proper correlation of records, and the explanation was unsupported on the available material. Equal penalty under section 11AC was set aside because the factual foundation for invoking the harsh penal provision was not established, including the absence of inquiry into recipients and the overall insufficiency of evidence for penal liability.

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Issues: (i) whether the demand of duty and interest was sustainable on the alleged clearances of samples, goods sent for demonstration, and short-supplied goods; (ii) whether equal penalty under section 11AC was justified.

Issue (i): Whether the demand of duty and interest was sustainable on the alleged clearances of samples, goods sent for demonstration, and short-supplied goods.

Analysis: The appellant failed to convincingly establish that the samples and demonstration goods were brought back and duly accounted for in the statutory records. The co-relation of kutcha receipts with excise invoices was also not satisfactorily demonstrated. The records showed at least one instance where the alleged short supply pre-dated the corresponding excise invoice, which could not support the appellant's explanation. On the available material, the alleged clearances remained unsubstantiated.

Conclusion: The demand of duty and interest was upheld and this issue was decided against the assessee.

Issue (ii): Whether equal penalty under section 11AC was justified.

Analysis: Although the appellant's explanation for non-payment was not found adequate, the inquiry was not extended to the recipients of the samples or demonstration goods, and the factual matrix did not establish a fit case for the harsh penalty invoked under section 11AC.

Conclusion: The penalty was set aside and this issue was decided in favour of the assessee.

Final Conclusion: The duty demand with interest was sustained, but the equal penalty was removed.

Ratio Decidendi: Where documentary co-relation and accounting of disputed clearances are not satisfactorily proved, duty demand may be sustained, but equal penalty is not automatic and depends on the overall factual foundation for penal liability.

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