Clandestine clearance evidence sustained part of the excise demand, while disputed register-based demand was remanded for fresh adjudication.
Parallel invoices and admitted clandestine removals supported the duty demand, so the corresponding extended-period demand, interest and equal penalty were sustained, along with connected Rule 26 penalties. The balance demand based on the batch register, RG-1 register and statements was not finally upheld because the appreciation of retraction and selective reading of evidence required fresh examination; it was remanded for de novo adjudication. Penalty proceedings against the deceased Managing Director abated once death before decision was established by the record.
Issues: (i) Whether the demand and equal penalty based on parallel invoices and clandestine clearances was sustainable; (ii) Whether the remaining demand based on the batch register, RG-1 register and statements required fresh adjudication; (iii) Whether penalty proceedings against the deceased Managing Director abated.
Issue (i): Whether the demand and equal penalty based on parallel invoices and clandestine clearances was sustainable.
Analysis: The records recovered from the factory and depot showed parallel invoices and undisputed clandestine clearances. The demand attributable to these invoices was supported by the statements relied upon in adjudication, and the fraudulent removals were admitted in substance during hearing. The invocation of the extended period and the penalty corresponding to this admitted portion were therefore upheld.
Conclusion: The demand of Rs. 5,32,322/- along with interest was upheld, and equal penalty under Section 11AC of the Central Excise Act, 1944 was sustained. The connected penalties under Rule 26 of the Central Excise Rules, 2001/2002 were also upheld.
Issue (ii): Whether the remaining demand based on the batch register, RG-1 register and statements required fresh adjudication.
Analysis: The balance demand depended substantially on appreciation of the batch register and the statements of officials. The finding on retraction of statements was viewed as having been made on an assumption-based approach, and the contention that the batch register had been selectively read had not been properly examined. This warranted reconsideration of the remaining demand on a fuller appreciation of the evidence.
Conclusion: The remaining demand of Rs. 25,48,526/- was set aside and remanded for de novo adjudication.
Issue (iii): Whether penalty proceedings against the deceased Managing Director abated.
Analysis: It was shown that the Managing Director had died before the decision and the record included the death certificate. In these circumstances, personal penalty proceedings could not continue.
Conclusion: The penalty proceedings against the deceased Managing Director abated.
Final Conclusion: The adjudged liability arising from parallel invoices was confirmed, the balance demand was sent back for fresh consideration, and the personal proceedings against the deceased director came to an end.
Ratio Decidendi: Where part of a duty demand is conclusively supported by admitted clandestine removals, it may be sustained with equal penalty, but a demand resting on disputed registers and statements requires de novo examination when retraction and selective appreciation of evidence have not been properly addressed.
TaxTMI 
AI Drafter ✕
TaxTMI 
