Clandestine removal cannot be presumed from RG-I non-entry alone; fresh adjudication was required on job work liability.

Mere non-entry of goods in RG-I, without independent evidence of clandestine manufacture and removal, is insufficient to sustain duty demand, penalty or confiscation. The commentary states that statutory stock record lapses may serve only as corroborative material and cannot by themselves justify a presumption of evasion. It also notes that the assessee's plea that the goods were manufactured on job work basis was not adequately examined, and that issue could affect the identity of the person liable to duty. The matter was therefore remitted for fresh adjudication after hearing the assessee.

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Issues: Whether mere non-entry of goods in RG-I, without adequate supporting evidence, could justify a presumption of clandestine removal and consequential duty, penalty and confiscation; and whether the assessee's plea that the goods were manufactured on job work required fresh consideration.

Analysis: Mere non-accountal in RG-I does not, by itself, establish clandestine removal. Such non-entry may operate only as corroborative material when supported by evidence of actual manufacture and removal without duty payment. The notice and adjudication also did not adequately address the assessee's plea that the goods were produced by a job worker, a contention that could affect the identity of the person liable to duty. In these circumstances, the matter required fresh adjudication after hearing the assessee and determining all issues afresh.

Conclusion: The demand, penalty and confiscation order could not be sustained on the existing findings and the matter was remitted for reconsideration, in favour of the assessee.

Ratio Decidendi: Non-entry in statutory stock records, without independent evidence of clandestine manufacture and removal, is insufficient to sustain duty liability and related penalties.

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