Clandestine removal proved by contemporaneous records, sustaining excise duty, interest, and Rule 26 penalties on connected persons.

Contemporaneous records, including production notebooks, yarn realisation statements, cone winding records and job-work documents, established suppression of actual production and clandestine clearance of cotton yarn through fictitious buyers and cash receipts. The corroborated statements of the persons concerned were treated as inculpatory and unretracted, and the absence of genuine reeling capacity with the claimed job workers supported the alleged modus operandi. On the totality of evidence and on a preponderance of probability, clandestine removal was proved, so the central excise duty demand, interest and equal penalty were upheld. Penalties on the director, broker and job worker under Rule 26 were also sustained.

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Issues: Whether the demand of central excise duty, interest and equal penalty for clandestine clearance of cotton yarn was sustainable, and whether penalties on the director, broker and job worker under Rule 26 of the Central Excise Rules, 2002 were justified.

Analysis: The investigation yielded multiple contemporaneous records, including production notebooks, yarn realization statements, cone winding records, job-work documents, diaries and notebooks recovered from the manufacturer, broker and job worker. These materials showed suppression of actual production, accounting of cone yarn as hank yarn, use of fictitious or unidentifiable buyers, routing of clearances through the broker, receipt of sale proceeds in cash, and absence of genuine reeling capacity with the claimed job workers. The statements of the persons concerned were found to be inculpatory and unretracted, and the documentary evidence sufficiently corroborated the modus operandi alleged in the show cause notice. On the totality of evidence, the charge of clandestine removal was established on a preponderance of probability, and the individual roles of the director, broker and job worker attracted penalty under Rule 26.

Conclusion: The duty demand, interest and penalties were upheld, and the appeals failed.

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