Clandestine removal may be proved by private records, but penalty cannot be imported for additional excise duty liability.

Private records, challans, cards and receipt books can support a finding of clandestine receipt of grey fabrics, clandestine manufacture and clearance without duty when they are internally consistent and corroborated by surrounding facts such as common premises, common control and unexplained stock movements. For liability under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, penalty cannot be imposed by importing Rule 173Q of the Central Excise Rules, because the 1957 Act itself contains no penalty provision. Where valuation is not final, duty and redemption fine may be sent back for fresh determination, while confiscation may still be maintained.

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Issues: (i) Whether the seized records and surrounding circumstances established clandestine receipt of grey fabrics, clandestine manufacture, and clandestine clearance of processed fabrics without payment of duty; (ii) whether penalty could be imposed for evasion of additional duty of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 by invoking Rule 173Q of the Central Excise Rules, 1944; (iii) whether the assessable value and duty required fresh determination and what relief followed on confiscation and redemption fine.

Issue (i): Whether the seized records and surrounding circumstances established clandestine receipt of grey fabrics, clandestine manufacture, and clandestine clearance of processed fabrics without payment of duty.

Analysis: The seized private records, challans, cards and receipt books, read with the evidence of common premises, common control, inability to segregate stock, and unexplained entries showing receipt by a dummy description, furnished independent corroboration of clandestine dealings. The authorities distinguished the objections based on lack of corroboration by showing that the records were genuine, internally consistent, and supported by surrounding facts. The evidence was sufficient to sustain the finding of clandestine manufacture and removal.

Conclusion: The finding of clandestine manufacture and clearance without payment of duty was upheld, against the Assessee.

Issue (ii): Whether penalty could be imposed for evasion of additional duty of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 by invoking Rule 173Q of the Central Excise Rules, 1944.

Analysis: The duty involved was additional duty of excise under the 1957 Act. That Act contains no provision authorising penalty. Penalty provisions under the Central Excise law could not be imported to impose penalty for liability arising under the 1957 Act.

Conclusion: The penalties were set aside, in favour of the Assessee.

Issue (iii): Whether the assessable value and duty required fresh determination and what relief followed on confiscation and redemption fine.

Analysis: The valuation adopted by the adjudicating authority was held not to be final for the present purpose and was directed to be recomputed afresh by the jurisdictional authority after hearing the parties. The confiscation of seized fabrics was maintained, but the redemption fine required fresh quantification.

Conclusion: The duty was remanded for re-determination, the confiscation was sustained, and the redemption fine was to be re-quantified.

Final Conclusion: The appeal succeeded to the extent of setting aside the penalties and securing remand for fresh determination of duty and redemption fine, while the finding of clandestine removal and the confiscation order were maintained.

Ratio Decidendi: Penalty cannot be imposed for liability arising under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 by recourse to the penalty provisions of the Central Excise Rules, and clandestine removal may be proved by genuine private records corroborated by surrounding circumstances.

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