Penalty in clandestine removal matters cannot be fastened on a firm or corporate entity, and unsupported duty demands may be remanded.

In clandestine removal matters, penalties were treated as unsustainable when imposed on a corporate entity or firm as such, while penalties on an individual or proprietorship concern could still be maintained under the excise framework, including Rule 26 of the Central Excise Rules, 2002. The duty demands were remanded for de novo adjudication because the record showed inadequate corroboration and defects in the fact-finding process, including no physical verification, cross-examination, buyer verification, or inquiry into raw material and electricity consumption. The remand was also directed to secure compliance with natural justice and allow additional evidence if needed.

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Issues: (i) Whether penalties could be sustained where they were imposed on a corporate entity, firm, or proprietorship concern in proceedings involving alleged clandestine removal. (ii) Whether the duty demands required remand for fresh adjudication in the absence of complete corroboration and proper opportunity of hearing.

Issue (i): Whether penalties could be sustained where they were imposed on a corporate entity, firm, or proprietorship concern in proceedings involving alleged clandestine removal.

Analysis: Penalty was held to be not desirable when levied on a firm or other legal entity, while penalty on an individual or proprietorship concern could be sustained. The conclusion was supported by the principle that penalty in such matters is to be imposed on a person and not on a corporate entity, and Rule 26 of the Central Excise Rules, 2002 was referred to in that context.

Conclusion: Penalties on corporate entities and firms were not sustained, whereas penalties on individuals or proprietorship concerns remained permissible.

Issue (ii): Whether the duty demands required remand for fresh adjudication in the absence of complete corroboration and proper opportunity of hearing.

Analysis: The duty demand was sent back for de novo consideration because the record showed inconsistencies in appreciation of facts and defects in the manner of adjudication. The absence of physical verification, cross-examination, verification from buyers, and investigation into raw material and electricity consumption was treated as significant, and corroborative evidence was considered necessary in clandestine removal matters. The remand was also directed to ensure observance of natural justice and to permit additional evidence if required.

Conclusion: The duty demands were remanded to the original authority for fresh adjudication after granting hearing to the assessees.

Final Conclusion: The dispute was not finally decided on the merits of the duty demand, and the penalties were confined by the legal distinction between corporate entities and persons amenable to penalty under the cited excise framework.

Ratio Decidendi: In clandestine removal cases, penalties cannot be imposed on a corporate entity or firm as such, and demands lacking adequate corroboration and observance of natural justice may be remanded for de novo adjudication.

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