Private records alone cannot sustain clandestine removal duty demand, but admitted excise contravention may still justify penalty.

A demand for central excise duty based only on rough private notings could not be sustained for the balance amount where clandestine removals were not independently established; only the admitted duty already paid was confirmed. The remaining demand was deleted because the record lacked reliable particulars and corroboration. The penalty under the Central Excise Rules was nevertheless upheld, as the assessee had admitted contravention in respect of part of the removals and the notice referred to violations within the self-removal compliance regime.

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Issues: (i) Whether the demand of central excise duty, except the amount already admitted and paid, was sustainable on the basis of the private register maintained by the sorter; (ii) Whether the penalty imposed under the Central Excise Rules was liable to be confirmed.

Issue (i): Whether the demand of central excise duty, except the amount already admitted and paid, was sustainable on the basis of the private register maintained by the sorter.

Analysis: The demand was founded on rough private notings said to have been maintained by the sorter. The Director had admitted only a limited quantity of removals without entry in the RG-1 register and without gate passes, and the assessee had already debited the corresponding duty amount. The remaining demand was not supported by reliable particulars or independent substantiation, and the alleged clandestine removals were not adequately established.

Conclusion: The demand was not sustainable to the extent of Rs. 1,43,106 and that part was set aside. The amount of Rs. 1,969 already paid was confirmed.

Issue (ii): Whether the penalty imposed under the Central Excise Rules was liable to be confirmed.

Analysis: The assessee had admitted contravention in respect of part of the removals, and the case fell within the self-removal regime where compliance depends substantially on the assessee's own records and declarations. In view of the admitted violation and the contraventions referred to in the notice, the penalty was maintained.

Conclusion: The penalty of Rs. 20,000 was confirmed.

Final Conclusion: The duty demand was reduced to the extent of the admitted payment, the balance demand was deleted, and the penalty was upheld.

Ratio Decidendi: A demand for clandestine removal cannot be sustained on uncorroborated private records alone when the remaining alleged removals are not independently established, though an admitted contravention may still justify penalty under the applicable excise rules.

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