Clandestine production demands require reliable corroboration; assumptions and extrapolation cannot sustain duty, penalty, or confiscation.

Clandestine manufacture and removal of biscuits cannot be supported on doubtful notebook entries and an Annexure-based computation that rests on assumptions, extrapolation, and inadequate corroboration. The material must have reliable evidentiary value, with supporting records such as seized documents, cash book entries, and proof of the use of essential raw materials; otherwise the duty demand fails. Where the foundational demand is not properly established, consequential confiscation, redemption fine, penalty, and issues such as clubbing of clearances or use of the same brand name cannot be finally sustained on the same record and require fresh examination.

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Issues: (i) Whether the demand of duty on alleged unaccounted production of biscuits, based on the note book and the Annexure A computation, could be sustained. (ii) Whether the order imposing confiscation, redemption fine and penalty, including the question of clubbing of clearances and use of the same brand name, required interference and remand.

Issue (i): Whether the demand of duty on alleged unaccounted production of biscuits, based on the note book and the Annexure A computation, could be sustained.

Analysis: The material relied upon for the duty demand was found to be doubtful in its ownership, relevance and evidentiary value. The computation proceeded on assumptions that the raw material receipts shown for one month represented the pattern for the whole year, without adequate corroboration from the seized records, cash book, or evidence of the use of other essential raw materials. The explanation regarding possible diversion or speculative sale of raw material was not shown to be untenable by independent evidence. Clandestine manufacture and removal cannot be sustained on conjectures, presumptions or extrapolation without reliable supporting material.

Conclusion: The duty demand based on alleged unaccounted production was not sustainable and was set aside in favour of the Appellant.

Issue (ii): Whether the order imposing confiscation, redemption fine and penalty, including the question of clubbing of clearances and use of the same brand name, required interference and remand.

Analysis: The liability arising from alleged use of the same brand name and removal of goods of one unit in the name of the other depended on a proper determination of the liability to duty first. Since the finding on alleged unaccounted production could not stand, the consequential issues of confiscation and penalty could not be finally affirmed on the existing record. The matter therefore required reconsideration of the clubbing issue and the consequential liabilities.

Conclusion: The order on confiscation, redemption fine and penalty was set aside and the matter was remanded for fresh consideration.

Final Conclusion: The appeal succeeded in part on the principal duty demand, and the consequential proceedings were sent back for reconsideration.

Ratio Decidendi: A demand for clandestine production and removal cannot be upheld on assumptions or extrapolation without reliable corroborative evidence, and consequential confiscation or penalty cannot be sustained until the foundational liability is properly established.

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