Knowingly aiding clandestine removal through false invoicing attracts penalty, though the amount may be reduced on equitable grounds.

Knowingly supplying ferro-alloys through parallel invoices, false invoicing and record manipulation to facilitate clandestine removal attracts penal liability under Rule 209-A of the Central Excise Rules, 1944. On the evidence of invoice books, daily reports, faxed records, slips, cheque entries and seized files, the dealer company was treated as actively concerned with goods liable to confiscation and as a participant in duty evasion. The liability finding was upheld, but the penalty was reduced on the facts because the Tribunal considered the original amount excessive in the total circumstances.

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Issues: (i) whether penalty under Rule 209-A of the Central Excise Rules, 1944 was sustainable against the dealer company for supplying ferro-alloys in a planned and systematic manner to facilitate clandestine removal and evasion of duty; and (ii) whether the penalty required reduction on the facts of the case.

Issue (i): whether penalty under Rule 209-A of the Central Excise Rules, 1944 was sustainable against the dealer company for supplying ferro-alloys in a planned and systematic manner to facilitate clandestine removal and evasion of duty.

Analysis: The recovered invoice books, parallel invoice numbers, daily reports, faxed office records, handwritten slips, cheque entries and seized files established that the appellant was not a mere supplier but was actively engaged in clearing ferro-alloys without invoices, issuing invoices without delivery, and issuing invoices in the name of other parties while dispatching goods to the buyer. The materials on record showed conscious participation by the director and employees, manipulation of records, and knowledge that the goods were being used in a scheme of clandestine removal. In those circumstances, the appellant was concerned with goods liable to confiscation and its conduct squarely attracted penal liability under Rule 209-A.

Conclusion: Penalty under Rule 209-A of the Central Excise Rules, 1944 was rightly imposed on the appellant company.

Issue (ii): whether the penalty required reduction on the facts of the case.

Analysis: Although the appellant's conduct justified penal action, the quantum imposed was considered excessive in light of the totality of circumstances. The appellant had already paid the penalty, and the Tribunal found it appropriate to interfere only with the amount, not with the finding of liability.

Conclusion: The penalty was reduced to Rs. 7,50,000.

Final Conclusion: The appeal succeeded only to the limited extent of reduction in penalty, while the finding of liability under the penal provision was maintained.

Ratio Decidendi: A dealer who knowingly participates in a scheme of supplying goods without invoices, issuing parallel or false invoices, and manipulating records to facilitate clandestine removal is concerned with goods liable to confiscation and can be penalized for abetment of duty evasion, though the penalty may be moderated on equitable considerations.

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