Penalty for alleged clandestine manufacture fails where common control and fictitious unit allegations rest on conjecture, not reliable evidence.

Penalty under Central Excise law could not be sustained because the allegations of clandestine manufacture, common control and a fictitious second unit were not proved by reliable evidence. The record showed two legally separate concerns with separate excise registrations and licences, and those formal separations could not be ignored merely because the entities were related. Assertions that one individual controlled both units, used a fictitious name, signed invoices for both concerns, or that the second unit had no machinery were not established by proper material, panchnama or admissible evidence. The adverse findings were therefore based on conjecture and unverified assumptions, and the penalty against both appellants was set aside.

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Issues: Whether the penalty imposed on the appellants for alleged clandestine manufacture and removal of brass screws through a purportedly fictitious second unit was sustainable in the absence of reliable evidence supporting the findings of common ownership, common control, and absence of manufacturing machinery.

Analysis: The factual basis adopted by the lower authorities was found unsupported by the record. The two concerns were legally separate entities, and the existence of separate excise registrations and licences could not be ignored merely because they were related concerns. The supposed proof that one individual controlled both units, used a fictitious name, wrote the invoices of both concerns, or that no machinery existed in the second unit was not established by proper material, panchnama, or admissible evidence. The conclusions reached below were held to rest on conjectures and unverified assumptions rather than proved facts.

Conclusion: The penalty was not justified and could not be sustained against either appellant.

Final Conclusion: The appeals succeeded and the orders of the lower authorities were set aside, with no penalty remaining payable.

Ratio Decidendi: A penalty under the Central Excise law cannot be sustained where the foundational allegations of fictitious manufacture and common control are not proved by reliable evidence and the adverse findings rest only on surmise.

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