Clandestine removal and non-accountal of stock justified duty demand, penalty, confiscation, and reduced redemption fine.

An un-retracted admission of clandestine removal, supported by stock shortage and non-accountal of raw materials, was sufficient to sustain the duty demand and penalty under Section 11AC. The admitted consumption of kraft paper in manufacture of goods cleared without payment of duty, together with voluntary duty payment, confirmed the suppression and justified the penalty. Confiscation of excess goods was also upheld because the assessee had availed input credit and failed to account for the materials properly in statutory records. The reduced redemption fine and penalties were found proportionate to the value of the goods and the surrounding circumstances.

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Issues: (i) Whether duty demand and penalty under Section 11AC were sustainable on the basis of shortage of raw material and the partner's un-retracted statement admitting clandestine removal of finished goods without payment of duty; (ii) Whether confiscation of the excess goods and the reduced redemption fine and penalties under the Central Excise Rules were justified.

Issue (i): Whether duty demand and penalty under Section 11AC were sustainable on the basis of shortage of raw material and the partner's un-retracted statement admitting clandestine removal of finished goods without payment of duty.

Analysis: The shortage of kraft paper was accepted in the later statement of the partner, who admitted that the material had been consumed in manufacture of wax coated paper cleared without payment of duty. The statement was not retracted. The duty amount had also been voluntarily paid. In these circumstances, the confirmation of duty was supported by the material on record and the ingredients for penalty under Section 11AC were made out.

Conclusion: The duty demand and the penalty under Section 11AC were upheld, against the assessee.

Issue (ii): Whether confiscation of the excess goods and the reduced redemption fine and penalties under the Central Excise Rules were justified.

Analysis: The excess goods were raw materials on which input credit had been availed and the assessee was bound to account for them properly in the statutory records. The departmental case was supported not only by non-accountal but also by the admission of clandestine clearance. The redemption fine and penalties were already reduced in appeal and were found not to be excessive having regard to the value of the goods and the circumstances of the case.

Conclusion: Confiscation of the seized goods and the reduced redemption fine and penalties were upheld, against the assessee.

Final Conclusion: The appellate order confirming duty, penalty, confiscation, and the personal penalty on the partner was sustained in full, and the appeal failed.

Ratio Decidendi: An un-retracted admission of clandestine removal, corroborated by stock discrepancies and non-accountal of materials, is sufficient to sustain duty demand, penalty, and confiscation under the Central Excise law.

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