Natural justice and proof of clandestine removal: duty demand failed where notice was absent and bank stock statement was not conclusive evidence.

Demand confirmation without a specific show cause notice was held unsustainable because the notice proposed only penalty and did not put the assessee on notice for recovery of duty or an admitted, quantified liability. The text also states that an inflated bank stock statement given to obtain overdraft facilities was not, by itself, conclusive evidence of clandestine manufacture or removal; duty could be confirmed only on cogent proof of actual clandestine clearance. On both grounds, the Revenue's challenge failed.

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Issues: Whether demand could be confirmed without putting the assessee to notice in the show cause notice and whether an inflated bank stock statement, by itself, constituted sufficient evidence of clandestine manufacture and removal.

Analysis: The Revenue had proceeded only for proposal of penalty under Rule 173Q of the Central Excise Rules, 1944, and the show cause notice did not specifically propose confirmation of demand or set out a case that liability had been admitted and quantified for recovery. Confirmation of demand without notice offended the principles of natural justice and was unsustainable. On the merits, an exaggerated stock statement furnished to a bank for obtaining overdraft facility was not, by itself, conclusive proof of manufacture and clandestine clearance; confirmation of duty required cogent evidence of actual clandestine removal.

Conclusion: The demand could not be sustained for want of proper notice, and the bank statement alone was insufficient to prove clandestine removal. The Revenue's challenge failed.

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