Clandestine removal evidence, limitation, and retrospective penalty rules shape duty disputes over medicine clearances and samples.

Duty was payable on physicians' samples cleared without payment of duty, but the quantified demand required fresh valuation and adjustment of amounts already paid. Contemporaneous outward and batch registers, together with admissions of the managing director and accountant, established clandestine removal of excisable medicines; the assessee failed to rebut the records with positive evidence, so the duty demand on such removals was sustained. Interest and mandatory penalty were not leviable because the relevant provisions came into force after the clearances and could not apply retrospectively. The extended period of limitation was invocable because suppression of facts was not convincingly disproved.

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Issues: (i) Whether duty was payable on physicians' samples of medicines cleared without payment of duty during the relevant period, (ii) whether clandestine removal of excisable medicines was proved so as to sustain the duty demand, (iii) whether interest and penalty were leviable, and (iv) whether the extended period of limitation was invocable.

Issue (i): Whether duty was payable on physicians' samples of medicines cleared without payment of duty during the relevant period.

Analysis: The samples were admittedly cleared without payment of duty and the assessee's own statements supported the Department's case on duty liability. The controversy remained on valuation and on whether the amount confirmed by the adjudicating authority reflected the correct assessable value after considering the payments already made.

Conclusion: Duty on physicians' samples was payable, but the quantified demand could not be sustained without fresh valuation and adjustment of amounts already paid.

Issue (ii): Whether clandestine removal of excisable medicines was proved so as to sustain the duty demand.

Analysis: The material outward register maintained at the factory gate, the batch register, and the admissions of the Managing Director and the accountant formed mutually corroborative evidence. The assessee failed to dislodge the correctness of the register entries or to prove the plea of double entries with positive evidence. The evidentiary burden remained undischarged by the assessee.

Conclusion: Clandestine removal was proved and the duty demand on the goods so removed was upheld.

Issue (iii): Whether interest and penalty were leviable.

Analysis: The liability to interest and mandatory penalty arose only under provisions that came into force after the relevant period of clearance. Those provisions could not be applied retrospectively to the disputed clearances.

Conclusion: Interest and penalty were not leviable and were set aside.

Issue (iv): Whether the extended period of limitation was invocable.

Analysis: The Department had alleged suppression of facts and the assessee did not produce convincing documentary material to show that the Department had full knowledge of the clearances and removals. The allegation of suppression was not successfully rebutted.

Conclusion: The extended period of limitation was validly invoked.

Final Conclusion: The duty demand on clandestinely removed goods was sustained, the demand on physicians' samples was sent back for fresh quantification, and the interest and penalty were set aside.

Ratio Decidendi: Where the Department relies on contemporaneous registers maintained by the assessee and such entries are corroborated by admissions and related records, the burden shifts to the assessee to rebut the evidence of clandestine removal with positive proof; failing that, the duty demand and extended limitation can be sustained, while penal provisions not in force during the relevant period cannot be applied retrospectively.

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