Clandestine removal demands need corroboration; an uncross-examined retracted statement and private diary entries were held insufficient.

A demand for duty and penalties based on alleged clandestine receipt of raw material, clandestine manufacture and removal could not be sustained where the Revenue relied only on a retracted, inconsistent and uncross-examined statement and private diary entries. The record lacked independent corroboration such as recovery of goods, excess electricity use, excess raw material procurement, excess labour, or other incriminating documents, and the bill discounting records did not prove actual movement of goods. The evidence was held to have no legal value, so the demand and penalties were set aside and the assessee obtained consequential relief.

---

---

Issues: Whether the demand of duty and penalties could be sustained on the basis of an uncross-examined, uncorroborated statement and private diary entries said to evidence clandestine receipt of raw material, clandestine manufacture and removal of finished goods.

Analysis: The sole material relied upon by the Revenue was the statement of a witness whose confessional statement had been retracted and whose later versions were inconsistent. He did not subject himself to cross-examination before the adjudicating authority, did not disclose the source of the diary entries, and no independent evidence corroborated the alleged entries. The record also did not show recovery of goods, excess consumption of electricity, excess procurement of raw material, excess labour, or any incriminating document establishing clandestine manufacture or clearance. The bill discounting and allied documents did not prove actual movement of goods, and the other statements on record did not establish clandestine receipt or removal.

Conclusion: The evidence relied upon had no legal value and was insufficient to prove clandestine manufacture or removal. The demand and penalties were not sustainable and were liable to be set aside in favour of the assessee.

Final Conclusion: The appeals succeeded and the duty demand and penalties imposed in the impugned order were set aside with consequential relief as permissible in law.

Ratio Decidendi: A demand of clandestine removal cannot rest solely on an uncross-examined, retracted, and uncorroborated statement or private records; such evidence must be independently tested and supported by reliable corroboration.

---