Clandestine removal requires positive corroborative evidence; transport registers alone cannot sustain demand, and Section 11AC is not retrospective.

Third-party transport register entries, without corroborative evidence, were held insufficient to prove clandestine receipt of raw material or clandestine removal of processed goods. The alleged demand failed because the record was not supported by direct evidence: consignors, buyers, or relevant employees were not examined, no goods were intercepted, and the charge required positive and tangible proof rather than assumption. Penalty under Section 11AC was also held unavailable for any period before 28-9-1996, since the provision could not operate retrospectively. On that basis, the demand and penalties were set aside.

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Issues: (i) whether entries in a transport company's registers, without corroborative evidence, were sufficient to prove clandestine receipt of raw material and clandestine removal of processed goods; (ii) whether penalty under Section 11AC could be imposed for a period prior to its commencement.

Issue (i): whether entries in a transport company's registers, without corroborative evidence, were sufficient to prove clandestine receipt of raw material and clandestine removal of processed goods.

Analysis: The duty demand rested mainly on third-party transport registers. Those entries, by themselves, were not conclusive of actual receipt by the assessee or of subsequent clandestine manufacture and removal. The record showed that several consignments were received by other named firms, supported by challans and delivery cash memos, and no consignor, buyer, or concerned employee of those firms was examined to dislodge that material. No goods were intercepted in transit and no direct evidence established clandestine clearances. A charge of clandestine removal had to be proved by positive and tangible evidence, not by assumptions or presumptions.

Conclusion: The finding of clandestine receipt and clandestine removal was not sustainable, and the demand could not be upheld on the basis of the transport registers alone.

Issue (ii): whether penalty under Section 11AC could be imposed for a period prior to its commencement.

Analysis: Section 11AC came into force on 28-9-1996, whereas part of the demand related to the earlier period. Penalty under that provision could not be levied retrospectively for a period before the section became operative.

Conclusion: Penalty under Section 11AC was not available for the pre-28-9-1996 period.

Final Conclusion: The demand and penalties were set aside because the allegations of clandestine manufacture and removal were not proved by admissible evidence, and the penalty provision invoked could not be applied retrospectively to the earlier period.

Ratio Decidendi: A charge of clandestine removal must be established by positive and tangible evidence with corroboration beyond third-party records, and a penal provision cannot be applied retrospectively in the absence of legislative mandate.

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