Clandestine manufacture allegations need corroborated evidence; private records and isolated irregularities were held insufficient to prove removal.

Uncorroborated private records were held insufficient to sustain a clandestine manufacture and removal allegation where they did not clearly link to the assessee's factory and were inconsistent with the statutory records. The Revenue also failed to show procurement of corresponding raw material, disposal of excess finished goods, or receipt of sale proceeds, so the dropped duty demand was sustained. Non-accountal of raw material was treated as only a technical lapse, and partial instances of evasion did not, by themselves, justify confirmation of the remaining disputed demand or enhancement of penalty without independent corroboration of production and removal. The Revenue's appeal was rejected and the order dropping the demand was upheld.

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Issues: (i) Whether the private record relied upon by the Revenue was trustworthy and sufficient, without corroboration, to sustain the dropped demand of duty of Rs. 43,77,344/- on the allegation of clandestine manufacture and removal. (ii) Whether the proved non-accountal of raw material and partial instances of evasion were enough to justify confirmation of the remaining disputed demand and enhancement of penalty.

Issue (i): Whether the private record relied upon by the Revenue was trustworthy and sufficient, without corroboration, to sustain the dropped demand of duty of Rs. 43,77,344/- on the allegation of clandestine manufacture and removal.

Analysis: The seized private record was found to be unreliable because it did not clearly establish any nexus with the assessee's factory, showed discrepancies vis-a -vis the statutory RG-1 register, and was not supported by evidence of procurement of corresponding raw material, disposal of excess finished goods, or receipt of sale proceeds. The mere existence of entries in such private records, without supporting material, was held insufficient to prove clandestine manufacture and removal.

Conclusion: The Revenue failed to establish the demand of Rs. 43,77,344/- and the finding dropping that demand was sustained.

Issue (ii): Whether the proved non-accountal of raw material and partial instances of evasion were enough to justify confirmation of the remaining disputed demand and enhancement of penalty.

Analysis: The non-accountal of raw material was treated as a technical lapse, and the Revenue did not produce further corroborative evidence to convert that lapse into proof of evasion. The existence of some confirmed instances of duty demand did not automatically establish clandestine clearance of the larger disputed quantity, because a finding of evasion required independent corroboration regarding raw material procurement and removal of finished goods. The Commissioner's appreciation of the evidence was therefore not shown to be erroneous.

Conclusion: The remaining grounds of the Revenue were rejected, and no enhancement of duty or penalty was warranted.

Final Conclusion: The Revenue's appeals were held to be without merit and the order dropping the disputed demand was upheld in substance.

Ratio Decidendi: Allegations of clandestine manufacture or removal cannot be sustained merely on the basis of uncorroborated private records or partial irregularities; the Revenue must establish the charge by reliable evidence linking raw material procurement, production, and removal of goods.

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