Clandestine removal proved by recovered records and shortages sustains duty demand, confiscation, and partner penalty, with reduced Section 11AC penalty.
Clear, unretracted admission of clandestine removal, corroborated by recovered delivery slips, intercepted goods, stock shortages and immediate payment on detection, was treated as sufficient to sustain the duty demand and confiscation of the goods, truck and redemption fine. The surrounding records were found consistent with removal without duty payment, and the assessee's later conduct did not displace that inference. The penalty under Section 11AC was moderated on the facts and reduced, but the separate penalty on the partner was upheld because active involvement in the removal was established.
Issues: (i) whether the demand of duty and confiscation of seized goods and truck were justified on the basis of recovered packing slips, lorry delivery slips, intercepted goods, shortages, and the partner's statement; (ii) whether the penalty under Section 11AC and the penalty on the partner required interference.
Issue (i): whether the demand of duty and confiscation of seized goods and truck were justified on the basis of recovered packing slips, lorry delivery slips, intercepted goods, shortages, and the partner's statement.
Analysis: The recovered documents contained complete particulars, including consignee details and vehicle numbers, and were treated as delivery slips rather than mere preparatory papers. The goods covered by them were not found in the factory or duty-paid godown, and the partner had admitted removal without payment of duty. That statement was not retracted, duty was paid immediately on detection, and the assessee did not prompt a timely plea that the orders stood cancelled. The intercepted truckload was also found without duty-paying documents, and the shortages in stock and in the duty-paid godown were not seriously disputed. On these facts, the finding of clandestine removal was supported by the surrounding conduct and records.
Conclusion: The demand of duty, confiscation of goods and truck, and redemption fine were upheld.
Issue (ii): whether the penalty under Section 11AC and the penalty on the partner required interference.
Analysis: The adjudicating authority had imposed an equivalent penalty under Section 11AC, but the appellate authority held that the provision authorised the maximum penalty and that the circumstances justified reduction. The partner's active role in the removal of goods also supported the separate penalty imposed on him.
Conclusion: The penalty under Section 11AC was reduced to Rs. 5 lakhs, while the penalty on the partner was upheld.
Final Conclusion: The appeals succeeded only to the limited extent of reduction of the main penalty, while the findings on duty, confiscation, and the partner's penalty were sustained.
Ratio Decidendi: A clear and un-retracted admission of clandestine removal, corroborated by recovered records, immediate payment without protest, and unexplained shortages, is sufficient to sustain duty demand and confiscation; the penalty under Section 11AC may be moderated on the facts, while a separate penalty can stand where the partner's active involvement is established.