Clandestine removal and wrong Cenvat credit findings sustained, while the individual penalty was reduced on factual grounds.

Contemporaneous records, panchnama and corroborated statements were treated as sufficient to establish clandestine removals and non-manufacture, so the central excise demand, related interest and penalty against M/s Mittal Overseas were sustained. On the same factual basis, Modvat/Cenvat credit taken by M/s A.S. Overseas was held to be wrongly availed because the unit was found non-functional and no manufacturing activity or receipt of inputs was established; the credit demand and penalty were sustained. Shri Sandeep Mittal was treated as the controlling person and his liability was upheld, but the penalty was reduced on the facts.

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Issues: (i) Whether the demand of central excise duty and related penalty against M/s Mittal Overseas for alleged clandestine removals was sustainable; (ii) Whether denial and recovery of Modvat/Cenvat credit from M/s A.S. Overseas was justified on the ground of non-manufacture and no receipt of inputs; (iii) Whether the penalty imposed on Shri Sandeep Mittal required interference.

Issue (i): Whether the demand of central excise duty and related penalty against M/s Mittal Overseas for alleged clandestine removals was sustainable.

Analysis: The demand was founded on recovered records and statements indicating large-scale removal of zinc alloy ingots without payment of duty. The evidence relied upon by the Department was accepted as sufficient to sustain the finding of clandestine removal, and the extended period, interest, and penalty were upheld.

Conclusion: The demand and penalty against M/s Mittal Overseas were sustained.

Issue (ii): Whether denial and recovery of Modvat/Cenvat credit from M/s A.S. Overseas was justified on the ground of non-manufacture and no receipt of inputs.

Analysis: The factory was found non-functional, the premises were closed, and the contemporaneous panchnama and statement of Shri Sandeep Mittal supported the finding that no manufacturing activity was being carried out. On that basis, the credit availed during the relevant period was held to be wrongly taken.

Conclusion: The demand of reversed credit and the penalty against M/s A.S. Overseas were sustained.

Issue (iii): Whether the penalty imposed on Shri Sandeep Mittal required interference.

Analysis: Shri Sandeep Mittal was treated as the controlling person of both units and as having facilitated diversion of raw materials and evasion of duty. While his liability was upheld, the quantum of penalty was found excessive in the overall facts and circumstances.

Conclusion: The penalty on Shri Sandeep Mittal was reduced from Rs. 10,00,000 to Rs. 1,00,000.

Final Conclusion: The appeal of M/s Mittal Overseas and M/s A.S. Overseas failed, while Shri Sandeep Mittal obtained relief only to the extent of reduction of penalty.

Ratio Decidendi: Where contemporaneous records, panchnama, and corroborated statements establish non-manufacture or clandestine clearances, excise demand, credit denial, and associated penalties may be sustained, though the penalty amount can be moderated on the facts.

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