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Issues: (i) Whether the removal of goods under 63 material gate passes without entry in statutory records and without duty payment amounted to clandestine removal and justified confirmation of duty demand; (ii) Whether the debits made in PLA and Cenvat accounts towards an earlier confirmed demand could be ignored on the plea that they were made without authority by an employee, and whether the consequent short payment on the second notice was sustainable; (iii) Whether penalty could be imposed on the manager who did not physically handle the goods but was responsible for excise compliance, and whether mandatory penalty and interest followed on the confirmed demands.
Issue (i): Whether the removal of goods under 63 material gate passes without entry in statutory records and without duty payment amounted to clandestine removal and justified confirmation of duty demand.
Analysis: The evidence showed removal of bulk chocolates from Unit No. 1 without central excise invoices, without entry in statutory records, and without duty payment. The defence that the goods were intended for Unit No. 2 and would have been duty-paid later was not supported by documentary proof. The later stoppage of manufacturing and return filing by Unit No. 2 also weakened the claim that the removals were routine transfers. The absence of records and invoices, together with non-payment, established clandestine clearance.
Conclusion: The demand of duty of Rs. 21,37,310/- was rightly confirmed against the assessee.
Issue (ii): Whether the debits made in PLA and Cenvat accounts towards an earlier confirmed demand could be ignored on the plea that they were made without authority by an employee, and whether the consequent short payment on the second notice was sustainable.
Analysis: The deposits made through TR-6 challans were treated as credits in the PLA and the liability stood discharged only when appropriated through PLA debits. The alleged unauthorized debits toward the earlier confirmed demand could not be ignored because the employee was in charge of excise compliance, the company itself had sought refund of the amount, and the record showed company knowledge and adoption of the entries. The plea that the debits were non est was therefore rejected. However, the adjudicating authority had wrongly confirmed the same amount twice under the two notices, and the duplicated portion could not survive.
Conclusion: The duty demand of Rs. 88,79,121/- was upheld, but the overlapping demand of Rs. 24,60,936/- was set aside to the extent of duplication.
Issue (iii): Whether penalty could be imposed on the manager who did not physically handle the goods but was responsible for excise compliance, and whether mandatory penalty and interest followed on the confirmed demands.
Analysis: A person need not physically deal with the goods to attract penal liability if he is concerned in the clearance and compliance process. The manager was expressly responsible for all excise matters, and the findings showed his involvement in the manipulation of statutory records. In view of the confirmed suppression and evasion, the statutory consequence of penalty under the special penalty provision followed, along with interest on the confirmed duty. At the same time, since the actual manipulation was carried out by another employee, the penalty on the manager warranted reduction.
Conclusion: Penalty on the manager was sustained but reduced to Rs. 3,00,000/-, and interest under the interest provision was payable on the confirmed duty.
Final Conclusion: The duty demands were substantially upheld, the duplicated demand was deleted, and the personal penalty was reduced, resulting in a partial relief to the assessee while affirming the core findings of clandestine removal, suppression, and liability for duty, penalty, and interest.
Ratio Decidendi: Clandestine removal is established where goods are cleared without invoices, statutory accounting, and duty payment, and a person responsible for excise compliance may be penalized for participation in or responsibility for such evasion even without physically handling the goods; duplicative duty demand for the same liability cannot be sustained.
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