Clandestine removal requires clinching evidence; unsupported duty demand and consequential penalties could not be sustained.

A duty demand based on alleged clandestine manufacture and removal of tubes from unreturned H.R. coils was not supported because the record contained only transporter statements and non-accountal, without corroboration of actual manufacture or clearance. The absence of evidence of electricity use, seizure of finished goods, sale proceeds, purchaser statements, or production personnel testimony meant the allegation could not be sustained. The plea under Notification No. 202/88 did not alter the result, because the crucial allegation of clandestine removal remained unproved. On that basis, the duty demand was unsustainable and the consequential penalties under Rule 209A could not survive.

---

---

Issues: Whether the demand of duty on the allegation of clandestine manufacture and removal of tubes from unreturned H.R. coils was sustainable, and whether the consequential penalties under Rule 209A of the Central Excise Rules, 1944 could be upheld.

Analysis: The duty demand rested on the assumption that H.R. coils sent for job work were not returned and were instead consumed in the appellant's factory for manufacture of tubes clandestinely cleared without payment of duty. The record, however, contained only the statements of transporters and the non-accountal of the coils by the consignee, but no corroborative material showing actual manufacture or removal. There was no evidence of consumption of electricity or other inputs, no seizure of finished goods, no proof of flow back of sale proceeds, no purchaser statements, and no statement from production personnel to establish manufacture from the disputed coils. In the absence of clinching evidence, the allegation of clandestine removal could not be sustained. The plea based on Notification No. 202/88 was not of assistance on the facts, as the inputs were imported against advance licence and were clearly recognizable as nil duty inputs, but that did not alter the result once clandestine removal itself remained unproved.

Conclusion: The demand of duty was unsustainable and the penalties under Rule 209A also could not survive.

---