Clandestine removal demands need corroborative evidence; unverified statements and weak invoice discrepancies cannot sustain duty, penalties or confiscation.

Clandestine removal of excisable goods must be proved by cogent, corroborative evidence; interpolation in invoice timings, uncorroborated worker and driver statements, and alleged carbon-paper discrepancies were found insufficient. With stock records showing no shortage or excess and no independent proof of unaccounted manufacture or actual removals, the duty demand was set aside. As the underlying demand failed, denial of input credit, penalties, interest, confiscation of plant and machinery, redemption fine and the connected penalty on the other noticee were also held unsustainable and annulled.

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Issues: (i) whether the alleged clandestine removal of excisable goods and the corresponding duty demand were established on the basis of the material relied upon; (ii) whether denial of credit, penalties, interest, confiscation and redemption fine were sustainable.

Issue (i): Whether the alleged clandestine removal of excisable goods and the corresponding duty demand were established on the basis of the material relied upon.

Analysis: The demand rested mainly on alleged interpolation in invoice timings, the tempo driver's statement, and statements of workers. The record showed that the carbon paper relied upon pertained to invoices of another period and did not reliably support the sweeping inference of interpolation across the invoices in dispute. The finding that two clearances were made on the same invoice was held to be unsupported, especially when the allegations in the notice did not justify the conclusion reached. The stock positions at the factory and godown were found to be correct, there was no shortage or excess of raw material or finished goods, and the department produced no independent material to prove unaccounted manufacture or actual quantity of goods allegedly removed without duty. The retracted statements were also relied upon without effective corroboration and without examination of the deponents for cross-examination.

Conclusion: The clandestine removal charge and the duty demand were not established and were set aside.

Issue (ii): Whether denial of credit, penalties, interest, confiscation and redemption fine were sustainable.

Analysis: The disallowance of credit on copper scrap invoices was not supported by reliable evidence, and there was no material to show that octroi non-production or alleged defects in supplier documentation disproved receipt of inputs. The entries in the relevant records were not shown to be false, and the alleged unaccounted production was not proved. Since the duty demand itself failed, the statutory penalties and interest invoked under the cited provisions could not survive. For the same reason, confiscation of plant and machinery and the consequential redemption fine, as well as penalty on the other noticee, were unsustainable.

Conclusion: The denial of credit, penalties, interest, confiscation and redemption fine were set aside.

Final Conclusion: The appeal succeeded in full and the impugned demands, penalties and confiscatory orders were annulled.

Ratio Decidendi: Clandestine removal must be proved by cogent, corroborative evidence and cannot rest on conjecture, presumptions or uncorroborated retracted statements.

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