Service by conduct, clandestine removal duty demand, and prospective Section 11AC penalty with director penalty deleted.

Contemporaneous company correspondence and requests for extension and documents were treated as sufficient evidence that the show cause notice had been served on the appellant company. The duty demand for clandestine removal of excisable goods was sustained because statements of company officials and other relied-upon material supported suppression, and no rebuttal was produced. Penalty under Section 11AC of the Central Excise Act was confined to clearances made after that provision came into force, with fresh quantification required for that limited period. Penalty on the Managing Director under Rule 209A of the Central Excise Rules was set aside because conscious knowledge or reason to believe was not established.

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Issues: (i) Whether the show cause notice was duly served on the appellant company; (ii) whether the demand of duty for alleged clandestine removal of excisable goods was sustainable; (iii) whether penalty under Section 11AC of the Central Excise Act could be imposed for the entire period covered by the notice; (iv) whether penalty on the Managing Director under Rule 209A of Central Excise Rules was justified.

Issue (i): Whether the show cause notice was duly served on the appellant company.

Analysis: The record contained letters from the Managing Director seeking extension of time to reply and from the Production Manager seeking copies of relied upon documents and acknowledging receipt of those documents. These documents were treated as conduct attributable to the company and were inconsistent with the plea that the notice had not been received. The affidavits filed later were found insufficient to displace the documentary record.

Conclusion: The show cause notice was held to have been duly served on the appellant company.

Issue (ii): Whether the demand of duty for alleged clandestine removal of excisable goods was sustainable.

Analysis: The finding of clandestine removal was based on statements recorded from company officials and other material relied upon by the adjudicating authority. The explanation that sufficient balance existed in RG23A Part-II was not accepted as a defence to removal without payment of duty. No material was produced to rebut the finding of suppression and clandestine clearance.

Conclusion: The demand of duty was upheld.

Issue (iii): Whether penalty under Section 11AC of the Central Excise Act could be imposed for the entire period covered by the notice.

Analysis: Penalty under Section 11AC was held to be inapplicable for clearances made prior to the coming into force of that provision, but applicable for the period after its insertion. The Tribunal rejected the contention that the entire penalty could not survive merely because part of the demand related to the earlier period. The matter was sent back for penalty determination confined to the post-insertion period.

Conclusion: Penalty under Section 11AC was held to be leviable only for the period after the provision came into force, and the issue was remanded for that limited purpose.

Issue (iv): Whether penalty on the Managing Director under Rule 209A of Central Excise Rules was justified.

Analysis: Rule 209A requires conscious knowledge or reason to believe that the goods were liable for confiscation. The adjudication order did not establish the Managing Director's specific role or conscious involvement in the wrongful removal of goods. In the absence of such findings, the statutory precondition for penalty was not satisfied.

Conclusion: The penalty on the Managing Director was set aside.

Final Conclusion: The demand of duty was sustained, the penalty against the Managing Director was deleted, and the penalty under Section 11AC was confined to the post-insertion period with the matter remanded for fresh quantification.

Ratio Decidendi: Service of notice can be inferred from contemporaneous conduct and company correspondence; penalty for clandestine removal requires proof of the statutory conditions, Section 11AC applies only prospectively from its commencement, and penalty on a director under Rule 209A requires conscious knowledge or reason to believe.

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