Clandestine removal must be proved by substantive evidence, not stock shortages, assumptions or uncorroborated production calculations.

Clandestine removal of goods could not be sustained where the demand rested mainly on stock shortage, production figures and a self-devised conversion formula, without corroborative evidence of unaccounted clearances. No goods were intercepted in transit, no buyer statements were recorded, and no independent oral or documentary proof supported the allegation; the shortage had already formed the basis of a separate demand and could not be relied on again. The duty demand and equal penalty were therefore set aside in favour of the assessee. A charge of clandestine removal must be proved by substantive evidence and cannot rest on presumptions, surmises or arithmetic assumptions.

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Issues: Whether the demand of duty and equal penalty on the allegation of clandestine removal of goods was sustainable on the basis of stock shortage, production figures and a self-conceived formula, in the absence of corroborative evidence.

Analysis: The duty demand was founded mainly on a comparison of issued slabs with tiles and crazy produced during the relevant period, and on converting the recorded production of crazy into square metres by applying a self-made formula. The record did not contain independent oral or documentary evidence of clandestine clearances. No goods were intercepted in transit without documents, and no buyer's statement was recorded. The shortage noticed at the time of verification had already been made the basis of a separate demand and could not, by itself, again sustain an allegation of clandestine removal. Clandestine removal cannot be upheld on presumptions, surmises or stray factors, and the burden remains on the department to establish it by substantive evidence.

Conclusion: The allegation of clandestine removal was not proved, and the setting aside of the duty demand and equal penalty was upheld in favour of the assessee.

Ratio Decidendi: A charge of clandestine removal must be proved by substantive and corroborative evidence, and cannot rest merely on presumptions, arithmetic assumptions, or stock discrepancies already accounted for through a separate demand.

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