Process loss of polyester fibre cannot justify duty demand without proof of clandestine removal or reliable abnormal loss basis.

Duty demand and penalties based on alleged excessive process loss of polyester fibre were found unsustainable because the record contained no evidence of clandestine production or removal of finished goods. The assessee's explanation that wastage could vary with fibre quality remained unrebutted, and there was no experimental or other reliable basis to fix abnormal loss. Mere comparison with a departmental wastage level was insufficient to justify the demand. The demand and consequential penalties were therefore set aside in favour of the assessee.

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Issues: Whether the duty demand and penalties based on alleged excessive process loss of polyester fibre were sustainable in the absence of evidence of clandestine production or removal.

Analysis: The record contained no evidence showing that the higher wastage was attributable to clandestine production or removal of finished goods. The assessee's explanation that wastage could vary with the quality of fibre remained unrefuted. In the absence of any experimental or other reliable basis to determine abnormal loss in such circumstances, the demand could not be sustained merely on the ground that the process loss was higher than the level suggested by the department.

Conclusion: The demand and consequential penalties were not sustainable and the appeals were allowed in favour of the assessee.

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