Clandestine removal demands fail when records show a bona fide accounting error and no proof of actual removal.

A demand for duty and penalty based on alleged clandestine removal of pacol catalyst could not be sustained where the records, correspondence and invoices showed dispatch of spent catalyst for refining and platinum recovery on job work basis. The accounting entry was treated as a wrong debit entry, and the department produced no documentary evidence of actual removal of the catalyst as such. In the absence of proof of clandestine removal, the demand and penalty were held unsustainable and were set aside in favour of the assessee.

---

---

Issues: Whether the demand of duty and penalty could be sustained on the allegation that the appellant had clandestinely removed pacol catalyst as such, or whether the entries in the accounts and connected documents showed only an accounting mistake and dispatch of spent catalyst for recovery of platinum on job work basis.

Analysis: The entries in the books, when read with the surrounding correspondence and invoices, indicated that what was sent to the job worker was spent pacol catalyst for treatment and refining, and not the original catalyst as such. The original authority's own reasoning showed that recovery of platinum was the only activity undertaken by the job worker, which supported the appellant's explanation that the disputed debit entry reflected a wrong accounting treatment. No documentary evidence established clandestine removal of the input as such. In the absence of proof of removal, the demand could not rest merely on the disputed ledger entry.

Conclusion: The allegation of clandestine removal was not proved. The demand and penalty were unsustainable and were set aside in favour of the assessee.

Ratio Decidendi: A demand for clandestine removal cannot be sustained where the record shows only a bona fide accounting error and the department fails to adduce evidence of actual removal of the goods as such.

---