Clandestine removal needs supporting evidence; mere non-accountal cannot prove duty demand beyond the admitted quantity.

Additional Collector competence to adjudicate extended-period central excise proceedings was affirmed on the basis that the relevant definition of "Collector" included an Additional Collector. On the merits, admitted non-accountal of 3,625 kgs. of granules was enough to sustain duty and penalty to that extent, but the balance allegation of clandestine manufacture and removal failed because mere non-entry in statutory records did not prove excess production or actual clearance without supporting investigation or evidence. The demand was therefore confined to the admitted unaccounted quantity, with benefit of doubt for the remaining quantity and corresponding reduction of penalty.

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Issues: (i) Whether the Additional Collector was competent to adjudicate proceedings where the extended period under Section 11A was invoked. (ii) Whether the demand of duty and penalty could be sustained on the basis of non-accountal of granules and alleged clandestine manufacture and removal of finished goods.

Issue (i): Whether the Additional Collector was competent to adjudicate proceedings where the extended period under Section 11A was invoked.

Analysis: The issue was treated as settled by prior decisions under the Central Excise framework, which recognized that the definition of Collector under the relevant rules included an Additional Collector for adjudication in such proceedings.

Conclusion: The Additional Collector was competent to adjudicate the matter, against the assessee.

Issue (ii): Whether the demand of duty and penalty could be sustained on the basis of non-accountal of granules and alleged clandestine manufacture and removal of finished goods.

Analysis: The admitted non-accountal of 3,625 kgs. of granules justified duty and penalty to that extent. For the balance 18,000 kgs., the record contained a statement supporting return of the loaned granules and no independent investigation established excess production, capacity-based production, or actual clandestine clearance. Mere non-entry in the statutory records was held insufficient by itself to prove clandestine removal.

Conclusion: The duty demand was sustained only for the admitted quantity of 3,625 kgs., while benefit of doubt was given for the remaining 18,000 kgs. and the penalty on the firm was reduced.

Final Conclusion: The appeal succeeded in part, with the duty and penalty sustained only to the extent of the admitted unaccounted quantity and the balance allegation of clandestine removal not proved.

Ratio Decidendi: Non-accountal of raw materials may create suspicion, but clandestine manufacture and removal cannot be inferred without supporting evidence of excess production or clearance.

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