Clandestine removal and duty recomputation under Rule 9A(5) led to partial relief on penalty and assessment.

Proper maintenance of the RG 1 account and clandestine removal were found established on the inspection records and officer statements, as the explanation that the goods were unfinished was rejected. The duty computation, however, was unclear on the record because the material needed to verify the correct rate under Rule 9A(5) was unavailable, so the demand was remitted for recomputation. Penalty was reduced in view of the evidentiary position and the absence of direct material proof on the gravest charge. The appeal therefore succeeded only in part.

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Issues: (i) Whether the charge of clandestine removal and irregular maintenance of the RG 1 account was established; (ii) whether the duty demand required re-computation under Rule 9A(5) of the Central Excise Rules, 1944 and whether the penalty called for reduction.

Issue (i): Whether the charge of clandestine removal and irregular maintenance of the RG 1 account was established.

Analysis: The evidence was held sufficient to sustain the finding that the RG 1 account had not been maintained properly. The explanation that goods were shown for inspection before being fully finished was not accepted, as the inspection records and the statements of the Inspecting Officers indicated that the goods were complete at the time of inspection. The surrounding circumstances also supported the conclusion that some production attributed to another unit had in fact been removed as the appellants' own production.

Conclusion: The charge was upheld against the appellant.

Issue (ii): Whether the duty demand required re-computation under Rule 9A(5) of the Central Excise Rules, 1944 and whether the penalty called for reduction.

Analysis: The basis adopted for computing the duty demand was found unclear from the record, and the material necessary to verify the correct rate of duty under Rule 9A(5) was not available. The matter therefore required reconsideration by the Collector for proper re-computation. On penalty, the finding that clandestine removal was not established by direct material evidence justified some relief in the quantum imposed.

Conclusion: The duty demand was remitted for re-computation, and the penalty was reduced.

Final Conclusion: The findings on the alleged evasion were sustained, but limited relief was granted on the computation of duty and on penalty, so the appeal succeeded only in part.

Ratio Decidendi: Where the factual record does not clearly disclose the basis of duty computation, the demand must be re-examined under the applicable rate provision, and penalty may be moderated where the gravest charge is not proved by direct material evidence.

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