Clandestine removal inference rejected where duty-paid goods were properly documented and rule-based accounting breach was not shown

Penalty under the Central Excise Rules could not be sustained where gate passes were obtained and duty debits made before removal, because Rule 51A did not require duty-paid goods to be cleared on the same day duty was paid. The alleged non-accountal of 10,000 HDPE bags also failed, as the goods were received under the relevant delivery challan and invoice with store receipt endorsement, and no rule required delivery-challan-wise individual entries in RG 9 for every receipt. The inference of clandestine manufacture and removal was therefore unsupported, and the penalty and finding of clandestine removal were set aside.

---

---

Issues: Whether penalty under the Central Excise Rules could be sustained on the basis of alleged breach of Rule 51A and alleged non-accountal of HDPE bags in the statutory records, leading to an inference of clandestine removal.

Analysis: The record showed that gate passes had been procured and duty debits made before the actual removal of the cement, and Rule 51A did not require that duty-paid goods be cleared on the same day on which duty was paid. The material on record also showed that the 10,000 HDPE bags were received under the relevant delivery challan and invoice, with an endorsement of receipt in store, and there was no condition requiring delivery-challan-wise individual entries in the RG 9 register for every receipt. The inference that the appellants had manufactured and cleared cement clandestinely in 10,000 bags was therefore unsupported.

Conclusion: The penalty was not sustainable and the finding of clandestine removal was set aside in favour of the assessee.

---