Clandestine removal proved by seized records and admission; confiscation and penalties sustained, with firm penalty reduced.

Denial of cross-examination was not treated as a natural justice breach where the duty demand rested on seized records and the appellant's own statement, not on customer or official statements. The contemporaneous records, admissions of manufacture and removals under separate challans, cash receipts, and destruction of challans were relied on to support clandestine manufacture and removal; the belated retraction and unsupported capacity certificate were rejected, and the duty demand was upheld. Confiscation of the goods and vehicle was justified because the intercepted van carried biscuit cartons without documents and outside the regular records. Penalties were sustained, with the firm's penalty reduced.

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Issues: (i) Whether denial of cross-examination of customers and Central Excise officials amounted to violation of natural justice; (ii) Whether the seized records, the appellant's statement, and surrounding evidence established clandestine manufacture and removal so as to sustain the duty demand; (iii) Whether the confiscation of the goods, vehicle, and the penalties were lawful, and whether the penalty on the firm required reduction.

Issue (i): Whether denial of cross-examination of customers and Central Excise officials amounted to violation of natural justice.

Analysis: The demand was founded on seized records and the appellant's own statement, not on the statements of customers. The records did not even contain customer addresses, and no customer statements were relied upon by the Department. The reference to electricity bills was also not the basis of the show cause notice, and the appellant had in any event accepted payment made towards the electricity demand.

Conclusion: The plea of violation of natural justice was rejected.

Issue (ii): Whether the seized records, the appellant's statement, and surrounding evidence established clandestine manufacture and removal so as to sustain the duty demand.

Analysis: The records seized from the factory premises showed customer-wise sales, packing details, and suppressed removals, and the appellant's initial statement admitted manufacture, removals under separate challans, cash receipts, and destruction of those challans. The belated retraction after about one year was treated as an afterthought. The certificate produced to show limited production capacity was found to be unsupported by technical material and unpersuasive against the contemporaneous records and admissions.

Conclusion: The duty demand was upheld in full.

Issue (iii): Whether the confiscation of the goods, vehicle, and the penalties were lawful, and whether the penalty on the firm required reduction.

Analysis: The intercepted van carried biscuit cartons without any covering documents, and the goods were not accounted for in the regular records, justifying confiscation of both the goods and the vehicle. The firm and the partner were liable to penalty for the proved clandestine removals and use of the vehicle for illegal transport. However, considering the facts, the penalty imposed on the firm was reduced.

Conclusion: Confiscation and the partner's penalty were sustained, while the firm's penalty was reduced to Rs. 3.50 lakhs.

Final Conclusion: The appeals succeeded only to the limited extent of reduction of the firm's penalty, while the duty demand, confiscation, and the remaining penal consequences were confirmed.

Ratio Decidendi: Clandestine removal may be sustained on the basis of seized contemporaneous records and an un-retracted admission, and a belated denial or unsupported capacity certificate will not displace such proof; confiscation and penalty follow where goods are removed without duty and without statutory documentation.

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