Additional Collector jurisdiction and proof of clandestine removal: weak uncorroborated evidence failed to sustain duty demand and penalty.

An Additional Collector was treated as competent to issue a show cause notice invoking the extended period under the excise limitation provision because the rules defined "Collector" to include an Additional Collector, and the subsequent amendment did not invalidate the earlier notice. On the substantive allegation of clandestine manufacture and removal of biris, the demand and penalty were found unsustainable because the department relied on weak, uncorroborated evidence from an ex-employee, unsupported records, and inconclusive handwriting material, without proving procurement, consumption, disposal, or sale proceeds. The burden to establish clandestine removal in a physically controlled regime remained on the department, and that burden was not discharged.

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Issues: (i) Whether the Additional Collector had jurisdiction to issue the show cause notice invoking the extended period under Section 11A of the Central Excises and Salt Act, 1944; (ii) Whether clandestine manufacture and removal of biris and the consequent duty demand and penalty were established on the evidence produced.

Issue (i): Whether the Additional Collector had jurisdiction to issue the show cause notice invoking the extended period under Section 11A of the Central Excises and Salt Act, 1944.

Analysis: The definition of Collector under the Central Excise Rules included an Additional Collector, and the rules were to be read as part of the Act. The Tribunal distinguished cases where notices were issued by officers below the rank of Collector. It also noted the subsequent amendment by Notification No. 11/92-C.E. (N.T.) dated 14-5-1992, but held that the earlier notice issued by the Additional Collector was not invalid on that ground. The authority issuing the notice was therefore treated as competent for the purpose of invoking the extended period.

Conclusion: The challenge to jurisdiction failed and the show cause notice was held to be validly issued.

Issue (ii): Whether clandestine manufacture and removal of biris and the consequent duty demand and penalty were established on the evidence produced.

Analysis: The demand rested mainly on records produced by an ex-employee and his statement. The Tribunal found that his conduct created doubt, the records were not independently proved, the authors of some entries were not examined, and the figures of evasion were unsupported by investigation into procurement, consumption, disposal, or sale proceeds of the goods. The handwriting report was treated as insufficiently conclusive. In a case of physical control, the department bore the burden of proving clandestine production and removal, and that burden was not discharged by uncorroborated and weak evidence.

Conclusion: The duty demand and penalty were not sustainable on merits and were set aside.

Final Conclusion: The appeal succeeded and the impugned order was set aside with consequential relief.

Ratio Decidendi: Where the statute and rules define Collector so as to include an Additional Collector, a notice issued by the Additional Collector under Section 11A is not invalid for want of jurisdiction; and allegations of clandestine removal must be proved by credible, corroborated evidence, with the burden resting on the department.

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