Clandestine removal evidence sustained duty liability, while pre-notice duty payment restricted the principal penalty and removed personal penalty.
Clandestine removal of excisable goods may be established through recovered delivery challans and unretracted admissions by responsible persons when the assessee offers no plausible explanation for the documents. Such evidence can sustain a duty demand for unaccounted removals. Pre-show-cause-notice payment of part of the duty may justify restricting the Section 11AC penalty to the unpaid balance. Personal penalty under Rule 209A may be set aside where the circumstances and relief concerning the principal penalty do not support its continuation.
Issues: (i) Whether the goods were clandestinely removed so as to justify confirmation of duty demand; (ii) Whether the penalty under Section 11AC of the Central Excise Act, 1944 required reduction in view of duty payment made before the show cause notice; (iii) Whether the personal penalty imposed under Rule 209A of the Central Excise Rules, 1944 was sustainable.
Issue (i): Whether the goods were clandestinely removed so as to justify confirmation of duty demand.
Analysis: Recovery of delivery challans from the factory, showing removal details of coated or laminated man-made fabrics, was not disputed. The challans were sufficient to shift the burden onto the assessee to explain their presence and contents, but no plausible explanation was offered. The manager and the partner admitted clandestine removal in their statements, and those statements were never retracted. On these facts, the removal of goods without accounting in excise records stood established.
Conclusion: The demand of duty was upheld against the assessee.
Issue (ii): Whether the penalty under Section 11AC of the Central Excise Act, 1944 required reduction in view of duty payment made before the show cause notice.
Analysis: The assessee had paid a part of the duty before issuance of the show cause notice. Relying on the principle applied to such pre-notice payments, the penalty under Section 11AC was not warranted to the extent of duty already paid before the notice.
Conclusion: The penalty under Section 11AC was reduced from Rs. 2,19,944/- to Rs. 75,000/-.
Issue (iii): Whether the personal penalty imposed under Rule 209A of the Central Excise Rules, 1944 was sustainable.
Analysis: In the light of the relief granted in relation to the main penalty and the facts recorded, the personal penalty imposed on the individual appellant was not sustained.
Conclusion: The penalty under Rule 209A was set aside.
Final Conclusion: The duty demand was sustained, the penalty under Section 11AC was substantially reduced, and the personal penalty under Rule 209A was annulled, resulting in only partial relief to the assessee.
Ratio Decidendi: Clandestine removal can be established by unretracted admissions and corroborative recovered documents, and where duty is paid before the show cause notice, penalty may be restricted to the balance amount not so paid.