Cancelled invoices and no proof of clearance defeated clandestine removal allegations and rendered duty demand unsustainable.

Duty demand and penalty were found unsustainable where clandestine removal was alleged on the basis of cancelled or unissued computerised invoices. The Tribunal noted that no evidence showed clearance of goods under those invoices, and that the same issue had already been decided in the assessee's favour on identical facts. It further held that the 24-hour intimation requirement under Rule 173G(2)(vii) applied only where debit entries had already been made; here, the invoices were cancelled before the weekly debit entries were posted and the cancellations were reflected in the RT-12 returns. The impugned order was set aside with consequential relief.

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Issues: Whether duty demand and penalty were sustainable on the allegation of clandestine removal based on cancelled or not issued computerised invoices, and whether prior intimation under Rule 173G(2)(vii) was required in the facts of the case.

Analysis: The Tribunal noted that the same controversy had already been decided in the appellants' favour in an earlier appeal involving identical facts. It was found that there was no evidence of clearance of goods under the cancelled invoices. The requirement of intimation within 24 hours under Rule 173G(2)(vii) applied only where debit entries had already been made, whereas in the present case debit entries were made only at the end of the week and the invoices had already been cancelled before such debit. The cancelled invoices had also been reflected in the monthly RT-12 returns.

Conclusion: The demand and penalty were not sustainable, and the impugned order was set aside with consequential relief to the assessee.

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