Clandestine removal requires corroborative evidence; untested records and invoice discrepancies alone cannot sustain duty demands or penalties.

Allegations of clandestine manufacture and clearance of diesel engines and generating sets failed because the Department relied mainly on bank records and invoices prepared for loan purposes without producing tangible, corroborative evidence of actual manufacture or removal. The absence of seized excess goods, shortages in raw materials or finished goods, recorded farmer statements, and documents sought by the noticee weakened the case, while reliance on untested statements without cross-examination was insufficient. The existence of regular purchase invoices and the lack of support from the income-tax enquiry further undermined the charge. Misdescription in some invoices, by itself, did not establish clandestine removal, and the penalties on connected persons for alleged non-duty-paid goods were unsustainable.

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Issues: Whether the allegation of clandestine manufacture and clearance of diesel engines and generating sets was proved, and whether the penalties imposed on the connected persons under Rule 209A could be sustained.

Analysis: The demand rested mainly on bank records and invoices produced for loan purposes, but the supporting material was not treated as sufficient, tangible, or corroborative evidence of actual clandestine manufacture or removal. The Department did not produce the documents sought by the noticee, did not record statements of farmers to verify the alleged purchases, did not establish seizure of excess goods, and did not show excess or shortage of raw materials or finished goods. The persons whose statements were relied upon were not offered for cross-examination, and their invoices showed regular purchases. The authority also noted that the Income-tax enquiry did not support the allegations and that the issue of misdescription in some invoices, by itself, did not prove clandestine removal.

Conclusion: The charge of clandestine manufacture and clearance was not proved, and the penalties imposed on the other appellants as recipients of alleged non-duty-paid goods were unsustainable.

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