Clandestine clearance under another unit's invoices sustains duty, while penalty fails under an inapplicable provision and abetment is punishable.

Contemporaneous records and un-retracted admissions showed that goods were actually manufactured by one unit and cleared under another unit's invoices to remain within SSI exemption limits, so duty demand against the real manufacturer was sustained. A composite penalty on the manufacturer under both Section 11AC and Rule 173Q could not stand because Section 11AC was not in force for the relevant period, and that penalty was set aside. Permitting invoice misuse established abetment by the other unit, so penalty under Rule 209A was maintained but reduced to Rs. 5,000.

---

---

Issues: (i) Whether duty demand was sustainable on the footing that the goods manufactured by Acufil were cleared in the name of Style without manufacture in Style's premises; (ii) Whether the penalties imposed on Acufil under Section 11AC and Rule 173Q of the Central Excise Rules, 1944 could be sustained; (iii) Whether the penalty imposed on Style for abetment under Rule 209A of the Central Excise Rules, 1944 was justified and liable to be reduced.

Issue (i): Whether duty demand was sustainable on the footing that the goods manufactured by Acufil were cleared in the name of Style without manufacture in Style's premises.

Analysis: The evidence showed negligible electricity consumption in Style's premises, absence of generator support, and non-maintenance of records expected of a registered manufacturer. The partners' statements recorded under Section 14 of the Central Excise Act, 1944 admitted that Style had been floated by Acufil to remain within the SSI exemption limits and that goods manufactured by Acufil were cleared under Style's invoices. The attempted retraction was belated and not a valid retraction. In these circumstances, the absence of further evidence such as financial flow-back or mutuality of interest did not weaken the departmental case.

Conclusion: The duty demand was rightly restored and is sustained.

Issue (ii): Whether the penalties imposed on Acufil under Section 11AC and Rule 173Q of the Central Excise Rules, 1944 could be sustained.

Analysis: The penalty was imposed under both provisions without any apportionment, and Section 11AC was not in force during the relevant period. A composite penalty resting partly on an inapplicable provision could not be maintained as imposed.

Conclusion: The penalty on Acufil is not sustainable and stands set aside.

Issue (iii): Whether the penalty imposed on Style for abetment under Rule 209A of the Central Excise Rules, 1944 was justified and liable to be reduced.

Analysis: Style permitted its invoices to be used for clearance of goods actually manufactured by Acufil. This established abetment, though the quantum fixed by the adjudicating authority was excessive on the facts.

Conclusion: The penalty on Style is sustained, but it is reduced to Rs. 5,000/-.

Final Conclusion: The departmental appeals succeed in part: the duty demand is restored, the penalty on Acufil is deleted, and the reduced penalty on Style is maintained.

Ratio Decidendi: When contemporaneous evidence and un-retracted admissions establish that goods were clandestinely cleared under another unit's invoices to secure SSI benefit, duty can be confirmed on the real manufacturer; however, a penalty cannot be sustained under an inapplicable penal provision, and abetment by permitting invoice misuse is independently punishable.

---