Clandestine removal requires corroborative evidence; mere stock discrepancy in raw materials was insufficient to sustain duty and penalty.

Duty demand and penalties based only on raw material stock shortages could not be sustained where material issue notes explained the discrepancy and the shortage remained negligible within the permissible tolerance range. In the absence of any independent evidence of clandestine removal or clearance, mere stock variation was insufficient to uphold the demand. The duty and penalties were therefore set aside in favour of the assessee.

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Issues: Whether duty demand and penalty could be sustained on the basis of shortages in raw material stock, where material issue notes explained the recorded discrepancy and there was no other evidence of clandestine removal.

Analysis: The shortages were found to be negligible when the material issue notes were taken into account and fell within the permissible tolerance range. Apart from the alleged shortage, there was no independent evidence to show clandestine clearance of raw material. Mere stock discrepancy, without corroborative evidence of removal, was insufficient to uphold the demand and penalties.

Conclusion: The duty demand and penalties were not justified and were set aside in favour of the assessee.

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