Duty on unauthorized removal of excisable goods upheld, while penalty was reduced on bona fide belief and surrounding facts.

Removal of inputs and capital goods to a neighbouring unit without duty payment, gate pass or invoice, and without compliance with the prescribed procedure, attracted duty liability because the statutory scheme permits such movement only in accordance with the relevant rule. The duty demand was upheld. Although the procedural breach remained established, the penalty was moderated on the facts, taking into account the assessee's bona fide belief and financial condition. The appeal therefore succeeded only to the limited extent of penalty reduction, while the duty confirmation was sustained.

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Issues: (i) Whether duty was payable on removal of inputs and capital goods to a neighbouring unit without payment of duty and without following the prescribed procedure; (ii) Whether the penalty imposed required interference and reduction in the facts of the case.

Issue (i): Whether duty was payable on removal of inputs and capital goods to a neighbouring unit without payment of duty and without following the prescribed procedure?

Analysis: The removal of inputs and capital goods without duty payment was not disputed. The goods were taken out without observing the required formalities, without gate pass or invoice cover, and without evidence of their return to the factory. The statutory scheme permits movement without duty only in accordance with the prescribed procedure, such as removal to a job worker under the relevant rule, and there is no recognised concept of loaning goods to another unit without duty payment.

Conclusion: The duty demand was rightly confirmed and is upheld against the assessee.

Issue (ii): Whether the penalty imposed required interference and reduction in the facts of the case?

Analysis: Although the assessee had failed to follow the prescribed procedure, the circumstances relied upon included bona fide belief and the financial condition of the company. Taking the totality of facts into account, the penalty was considered capable of moderation even though the duty liability remained intact.

Conclusion: The penalty was reduced to a lesser amount, in favour of the assessee to that limited extent.

Final Conclusion: The appeal succeeded only to the limited extent of reduction of penalty, while the confirmation of duty liability was sustained.

Ratio Decidendi: Removal of excisable goods without following the prescribed procedure attracts duty liability, while penalty may be moderated on the facts where bona fide belief and surrounding circumstances justify partial relief.

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