Clandestine production demands need corroborative evidence; shortage of packing material alone is insufficient to sustain duty and penalties.

A duty demand for alleged unaccounted production or clearance cannot be sustained on the sole basis of shortage of packing material unless supported by independent corroborative evidence. The article notes that the demand rested only on a shortage of plastic laminated flexible film used as packing material, without enquiry into raw material consumption, labour deployment, production records, or other circumstances indicating manufacture or removal. On that factual basis, a mere shortage of packing material was held insufficient to establish clandestine production or clearance, and the connected duty demand, penalty, redemption fine and interest were set aside.

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Issues: Whether a demand of excise duty and the consequential penalty, redemption fine and interest could be sustained solely on the basis of shortage of packing material, without further investigation into production, raw material consumption, labour deployment, or other relevant circumstances.

Analysis: The demand in dispute rested only on the shortage of plastic laminated flexible film said to be used as packing material. No supporting enquiry was made into other factors relevant to probable production or removal, such as utilisation of other raw materials, labour, or connected production data. A mere shortage of packing material, by itself, was held insufficient to found a demand in the absence of corroborative evidence showing manufacture or clearance of the alleged goods.

Conclusion: The duty demand based on shortage of packing material was set aside, and the connected penalties, redemption fine and interest relating to that demand were also set aside, in favour of the assessee.

Ratio Decidendi: A duty demand for alleged unaccounted production or clearance cannot be sustained on the sole basis of shortage of packing material unless supported by independent corroborative evidence establishing the clandestine manufacture or removal.

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