Clandestine removal demands need corroboration; uncross-examined statements and unproved records cannot sustain excise penalties retrospectively.

Clandestine receipt of raw material and clandestine manufacture and clearance of copper wire rods were not proved where the Revenue relied mainly on slip pads, loose papers, a register and a supervisor's statement that was not tested by cross-examination, was vague on authorship and contents, and was not corroborated by other employees or independent evidence; the retracted director's statements were likewise unsupported by supplier or buyer statements, excess electricity data, or recovery of unaccounted stock. The allegation therefore failed. Penalty under Section 11AC of the Central Excise Act was also not sustainable for a period preceding its introduction, as a penal provision cannot operate retrospectively. The duty demand and penalties were set aside.

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Issues: (i) Whether the alleged clandestine receipt of raw material and clandestine manufacture and clearance of copper wire rods stood proved on the basis of seized papers and recorded statements; (ii) whether penalty under Section 11AC of the Central Excise Act could be sustained for a period prior to its introduction.

Issue (i): Whether the alleged clandestine receipt of raw material and clandestine manufacture and clearance of copper wire rods stood proved on the basis of seized papers and recorded statements.

Analysis: The finding of clandestine activity rested mainly on slip pads, loose papers, a register, and the statement of a supervisor. The statement was not tested by cross-examination, remained vague as to authorship and contents, and was not corroborated by statements of the other alleged employees. The seizure itself was not independently proved through supporting witnesses, who did not support the Revenue version. The retracted statements of the director were also unsupported by reliable independent evidence such as supplier statements, buyer statements, excess electricity consumption, or recovery of unaccounted stock.

Conclusion: The allegation of clandestine receipt, manufacture, and clearance was not proved against the assessee.

Issue (ii): Whether penalty under Section 11AC of the Central Excise Act could be sustained for a period prior to its introduction.

Analysis: Penalty under Section 11AC is a statutory penal provision and could operate only from the time it came into force. The period of alleged evasion preceded the introduction of that provision, so the penalty could not validly be imposed for the past period.

Conclusion: The penalty under Section 11AC was not sustainable.

Final Conclusion: The duty demand and penalties were set aside, and the appeals succeeded with consequential relief.

Ratio Decidendi: A finding of clandestine removal cannot be sustained on uncross-examined, uncorroborated, and retracted statements unsupported by independent evidence, and a penal provision cannot be applied to a period before its commencement.

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