Unretracted admission of duty evasion sustains demand; penalty remains leviable but may be reduced on surrounding facts.

An un-retracted admission by the proprietor of suppressed production and removal of goods without duty payment was treated as substantive evidence, so the absence of a panchnama or independent witnesses did not weaken the duty demand. Deliberate evasion supported penalty under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules, and payment after detection did not amount to voluntary compliance before notice. The duty confirmation was sustained, while the penalty was maintained but reduced on the facts, including the post-raid deposit of duty.

---

---

Issues: (i) Whether the absence of a panchnama and independent witnesses at the time of search vitiated the reliance placed on the proprietor's statement and the resulting duty demand. (ii) Whether penalty under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules, 1944 was leviable, and if so, whether the amount required reduction.

Issue (i): Whether the absence of a panchnama and independent witnesses at the time of search vitiated the reliance placed on the proprietor's statement and the resulting duty demand.

Analysis: The proprietor was present during the visit of the Central Excise officers, raised no contemporaneous objection to the search, and made a statement admitting suppression of production and removal of goods without payment of duty. The statement was never retracted on the ground of coercion, duress, or threat. An admission by its maker is substantive evidence, and in these circumstances the absence of independent witnesses or a panchnama did not affect the merits of the case.

Conclusion: The challenge to the duty confirmation failed and the finding against the assessee was sustained.

Issue (ii): Whether penalty under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules, 1944 was leviable, and if so, whether the amount required reduction.

Analysis: The admitted and deliberate evasion supported imposition of mandatory penalty. Payment of duty after detection did not make the case one of voluntary compliance before issuance of notice, so the plea that no penalty could be levied was rejected. At the same time, the surrounding facts, including post-raid deposit of duty, justified moderation of the penalty amount.

Conclusion: Penalty was held leviable, but the amount was reduced to Rs. 1 lakh.

Final Conclusion: The duty demand was upheld, while the penalty was sustained with reduction in quantum, resulting in only limited relief to the assessee.

Ratio Decidendi: An un-retracted admission of evasion by the proprietor constitutes substantive evidence, and deliberate evasion attracts penalty under Section 11AC and Rule 173Q, though the quantum may be moderated on the facts of the case.

---