Scope of remand and proof of clandestine removal governed the duty demand, with the linked penalty on M.M. Steels set aside.

In de novo proceedings on alleged clandestine clearance of CTD bars through M.M. Steels, the demand had to remain within the scope of remand and be supported by acceptable evidence of actual removal. Reworking the demand on EXIM Policy input-output norms, when those norms were not part of the show-cause notice and the goods were neither imported nor exported, was treated as beyond remand and insufficient to prove clandestine clearances; the disputed duty demand was set aside. The equal penalty linked to the duty already sustained in the earlier round was maintained, while the penalty on M.M. Steels could not survive once the related demand failed.

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Issues: (i) whether the duty demand of Rs. 9,67,335/- confirmed in de novo proceedings for alleged clandestine clearance of CTD bars through M.M. Steels was sustainable; (ii) whether the corresponding penalty and the penalty on M.M. Steels could survive.

Issue (i): whether the duty demand of Rs. 9,67,335/- confirmed in de novo proceedings for alleged clandestine clearance of CTD bars through M.M. Steels was sustainable.

Analysis: The remand was confined to reconsideration of the demand relating to the alleged clearances through M.M. Steels. The adjudicating authority travelled beyond the scope of remand by reworking the demand on the basis of input-output ratios drawn from EXIM Policy norms, although the goods were neither imported nor exported and those norms were not the basis of the show-cause notice. The demand was also reduced by the authority to a figure different from the original notice without establishing, by acceptable evidence, how the alleged clandestine clearances were actually routed through the traders relied upon. The materials did not satisfactorily establish the alleged removal on the required standard of proof.

Conclusion: The duty demand of Rs. 9,67,335/- was not sustainable and was set aside in favour of the assessee.

Issue (ii): whether the corresponding penalty and the penalty on M.M. Steels could survive.

Analysis: The duty demand already upheld in the earlier round had attained finality, and the equal penalty relatable to that sustained demand was therefore maintained. As the duty demand against M.M. Steels was set aside, the penalty imposed on it could not survive.

Conclusion: The equal penalty connected with the sustained duty demand was upheld, while the penalty of Rs. 1,00,000/- on M.M. Steels was set aside.

Final Conclusion: The appeal succeeded only to the extent of the disputed de novo demand and the connected penalty on M.M. Steels, while the earlier sustained duty demand, interest, and related equal penalty remained intact.

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