Clandestine removal demands need corroborative evidence; balance sheet discrepancies alone cannot sustain excise duty, penalty or interest.

Mere discrepancy between balance sheet figures and statutory excise records is insufficient to sustain a demand for central excise duty, penalty or interest. Clandestine manufacture and removal must be proved by affirmative, corroborative evidence showing excess receipt of raw material, consumption, production and clearance beyond recorded accounts. Where the assessee produced a chartered accountant's certificate and reconciliation explaining the figures, and the Department did not rebut that material, suspicion could not replace proof. On that basis, the demand, penalty and interest were not sustainable.

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Issues: Whether demand of central excise duty, penalty and interest could be sustained solely on the basis of discrepancy between the balance sheet and statutory excise records, without corroborative evidence of unrecorded production and clandestine removal.

Analysis: Mere variation between the quantities reflected in the balance sheet and those recorded in excise returns was held insufficient to establish clandestine manufacture or removal. The respondents had furnished a chartered accountant's certificate and a reconciliation chart explaining that part of the figure represented trading sales, and the Department did not rebut that material. The settled principle applied was that clandestine removal must be proved by affirmative and corroborative evidence showing receipt of raw material, consumption, production and removal in excess of statutory records. Suspicion, even if strong, cannot substitute for proof, and the Revenue failed to discharge the burden cast on it.

Conclusion: The demand, penalty and interest were not sustainable and were rightly dropped.

Ratio Decidendi: A charge of clandestine removal cannot be upheld merely on balance sheet discrepancies unless supported by affirmative corroborative evidence of unrecorded manufacture and clearance.

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