Invoice-less clearance and stock shortage can sustain excise penalty, but personal penalty must reflect the officer's actual role.

Invoice-less clearance of molasses and an unexplained stock shortage can justify penalty under central excise law where physical stock does not match the RG-1 register and no credible explanation is offered. On those facts, the company's penalty was sustained because the contraventions were established and no further reduction was warranted. The executive director was also held responsible as the person overall in charge, but the penalty was reduced because he was not shown to be handling day-to-day factory operations and the penalty on the main noticee had already been imposed at a lower level. The decision emphasises proportionality in fixing personal penalty.

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Issues: (i) Whether the penalty on the company for clearance of molasses without central excise invoices and for unexplained shortage of stock warranted interference; (ii) Whether the penalty on the executive director was sustainable and, if so, to what extent.

Issue (i): Whether the penalty on the company for clearance of molasses without central excise invoices and for unexplained shortage of stock warranted interference.

Analysis: The goods were found cleared in four tankers without being accompanied by central excise invoices, and a substantial shortage of molasses was also noticed when the physical stock was compared with the RG-1 register. No reasonable explanation was found for either the invoice-less clearances or the shortage. On these facts, the company remained liable for the contravention and no further reduction in the penalty was justified.

Conclusion: The penalty on the company was sustained and the appeal on this issue was rejected.

Issue (ii): Whether the penalty on the executive director was sustainable and, if so, to what extent.

Analysis: The executive director, being overall in charge of the company, could not be completely absolved of responsibility for compliance with central excise law. At the same time, the record showed that he was not looking after the day-to-day affairs of the factory and the main noticee had been penalised at a lower amount. In these circumstances, the penalty required reduction on the ground of proportionality.

Conclusion: The penalty on the executive director was sustained but reduced from Rs. 5,00,000/- to Rs. 50,000/-.

Final Conclusion: The company's challenge failed, while the executive director obtained partial relief by way of substantial reduction of penalty.

Ratio Decidendi: Where invoice-less clearance and unexplained stock shortage are established, penalty may be sustained, but the quantum must still bear a reasonable proportion to the role and responsibility of the person proceeded against.

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