Clandestine removal must be proved by corroborative evidence; factory goods not entered in RG 1 were not liable to confiscation.

Goods lying within the factory premises could not be confiscated merely because they were not entered in RG 1, since there was no evidence of attempted unauthorised removal and confiscation under Rule 173Q was therefore unsustainable. The demand for duty on alleged clandestine manufacture and removal of sheets also failed because such allegations require positive corroborative evidence, and suspicion alone cannot sustain liability under Rule 9(2) and Section 11A. The Revenue having failed to prove either clandestine removal or confiscation liability, the assessee succeeded.

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Issues: (i) Whether goods found in the factory premises but not entered in RG 1 register were liable to confiscation under Rule 173Q of the Central Excise Rules, 1944; (ii) Whether the demand of duty for alleged clandestine manufacture and removal of sheets could be sustained in the absence of corroborative evidence.

Issue (i): Whether goods found in the factory premises but not entered in RG 1 register were liable to confiscation under Rule 173Q of the Central Excise Rules, 1944.

Analysis: The goods remained within the factory premises and there was no material to show any attempt to remove them without payment of duty. In such circumstances, confiscation could not be justified merely on account of non-entry in the statutory record.

Conclusion: The confiscation was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the demand of duty for alleged clandestine manufacture and removal of sheets could be sustained in the absence of corroborative evidence.

Analysis: Allegations of clandestine removal require positive and corroborative evidence. The record did not establish illicit manufacture or removal, and the departmental computation did not rebut the assessee's explanation. A demand under Rule 9(2) of the Central Excise Rules, 1944 and Section 11A of the Central Excise Act, 1944 cannot rest on suspicion alone.

Conclusion: The demand of duty was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The Revenue failed to establish either confiscation liability or clandestine removal, and the appeal was rejected.

Ratio Decidendi: Clandestine removal and related duty demand must be proved by positive corroborative evidence, and goods lying in the factory premises cannot be confiscated absent proof of attempted unauthorised clearance.

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