Clandestine removal requires corroboration; unverified documents and retracted statements were held insufficient to sustain duty demand.

Recovered documents and retracted statements, without proper corroboration, were held insufficient to support a finding of clandestine removal of processed man-made fabrics. The burden remained on the Revenue to link the seized papers to the assessee and to prove actual production and clearance from the factory; mere recovery from an employee's or dealer's premises did not establish duty evasion. The investigation also failed to examine the custodian of the documents or correlate entries with specific transactions, and did not consider material indicators such as capacity, electricity use and labour deployment. On that record, the demand and penalties were not sustainable and the matter was remanded for fresh adjudication after hearing the assessee.

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Issues: Whether the demand of duty and penalty for alleged clandestine removal of processed man-made fabrics could be sustained on the basis of recovered documents and retracted statements without proper corroboration, and whether the adjudication order required interference.

Analysis: The burden lay on the Revenue to first establish that the recovered documents and the entries therein related to the assessee and reflected actual production and removal from the factory. Mere recovery of documents from the premises of an employee or dealer did not, by itself, prove clandestine clearance. The statements of the directors had been retracted, and no effort was made to examine the person from whose custody the documents were recovered or to correlate the entries with specific transactions. The investigation also failed to consider relevant indicators such as installed capacity, electricity consumption and labour deployment, which are ordinarily material in cases of clandestine manufacture and removal. The adjudication proceeded on a shifted burden and without adequate corroborative inquiry.

Conclusion: The demand and penalties could not be sustained on the record as it stood, and the impugned order was set aside with a remand to the original authority for fresh decision after affording hearing to the assessee.

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