Clandestine Removal Proven on Corroborated Admission; Duty Sustained, Penalty Reduced, and Director's Personal Penalty Set Aside

Unretracted inculpatory admission, corroborated by a seized notebook recovered from the director's office and contemporaneous payment at detection, was treated as sufficient to establish clandestine removal of excisable goods. The absence of buyer-wise statements did not defeat the finding where the clearances were admitted as open-market sales, and the duty demand against the manufacturing unit was sustained. Pre-notice payment of duty did not erase the underlying clandestine removal, but it was taken as a mitigating factor for penalty quantification. The manufacturing unit's penalty was reduced, while the director's separate personal penalty was set aside.

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Issues: (i) Whether clandestine removal of excisable goods was established on the basis of the seized notebook and the director's statement; (ii) whether penalty on the manufacturing unit and the director was sustainable and to what extent it could be reduced.

Issue (i): Whether clandestine removal of excisable goods was established on the basis of the seized notebook and the director's statement.

Analysis: The notebook was recovered from the director's office cupboard and the entries therein were supported by the director's contemporaneous, unretracted statement admitting clearances of texturised yarn without payment of duty. The payment made at the time of detection was not subsequently challenged. In such circumstances, the evidentiary burden shifted to the appellants to displace the incriminating material, and the record was treated as mutually corroborative. The absence of buyer-wise statements did not vitiate the finding where the clearances were admitted as open-market sales.

Conclusion: Clandestine removal was held to be proved and the duty demand against the manufacturing unit was sustained.

Issue (ii): Whether penalty on the manufacturing unit and the director was sustainable and to what extent it could be reduced.

Analysis: Penalty was not displaced merely because duty had been paid before issuance of the show cause notice, since such payment did not erase the underlying clandestine removal. At the same time, pre-notice payment was treated as a mitigating circumstance for quantification of penalty. The director's separate penalty under Rule 209A of the Central Excise Rules, 1944 was set aside.

Conclusion: Penalty on the manufacturing unit was reduced, and the penalty on the director was set aside.

Final Conclusion: The demand of duty and the finding of clandestine removal were maintained, but the monetary penalty on the manufacturing unit was scaled down and the personal penalty on the director was removed.

Ratio Decidendi: Unretracted inculpatory admission, supported by contemporaneous seizure material, can sustain a finding of clandestine removal, and pre-notice payment of duty may mitigate but does not nullify penalty.

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