Clandestine removal demands need independent evidence; uncorroborated material cannot sustain excise duty, confiscation, or penalties.

Clandestine manufacture and removal of processed fabrics could not be sustained on suspicion or uncorroborated material alone; the department lacked independent proof such as raw material receipts, excess power use, transport records, sale proceeds, or reliable evidence of actual production, so the large central excise duty demands were set aside. Confiscation and penalties were also interfered with because the principal demands failed and the supporting findings were inadequate: redemption fines were reduced or deleted where excessive, goods lying in the factory were not liable to confiscation, the major penalty was reduced, and personal penalties under Rule 209A were set aside. Only limited duty and reduced fine liability survived.

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Issues: (i) Whether the large demands of central excise duty for alleged clandestine manufacture and clearance of processed fabrics could be sustained on the basis of the material relied upon by the department. (ii) Whether the confiscation, redemption fine and personal penalties imposed under the Central Excise Rules were justified and, if not, to what extent they required interference.

Issue (i): Whether the large demands of central excise duty for alleged clandestine manufacture and clearance of processed fabrics could be sustained on the basis of the material relied upon by the department.

Analysis: The demands were founded mainly on an uncorroborated document and statements, without supporting proof of actual manufacture, receipt of raw material, excess electricity consumption, transport, sale proceeds, or other independent evidence showing clandestine removal. The departmental case did not establish the quantity alleged with reliable and concrete material, and the record showed that the assessee's production capacity could not support the huge demand raised.

Conclusion: The duty demands of Rs. 34,47,007/- and Rs. 1,62,05,830/- were not sustainable and were set aside in favour of the assessee.

Issue (ii): Whether the confiscation, redemption fine and personal penalties imposed under the Central Excise Rules were justified and, if not, to what extent they required interference.

Analysis: The confiscation and fines were examined item-wise. Redemption fine was reduced where the duty liability was comparatively small and the fine was found excessive. Confiscation of goods still lying in the factory was held improper. The major penalty was reduced because the principal demands failed, and the personal penalties were set aside because no clear findings supported their imposition.

Conclusion: The redemption fines were substantially reduced or set aside, the penalty of Rs. 1 crore was reduced to Rs. 30,000/-, and the personal penalties under Rule 209A were set aside, in favour of the assessee.

Final Conclusion: The order was modified by deleting the principal duty demands and by substantially scaling down the consequential confiscatory and penal reliefs, resulting in only limited duty and reduced fine liability surviving.

Ratio Decidendi: Allegations of clandestine manufacture and removal cannot be sustained on suspicion, presumption, or uncorroborated material alone; independent and reliable evidence is required before confirming duty, confiscation, or penal consequences.

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