Clandestine removal demands need independent corroboration; unverified third-party recoveries and statements cannot sustain duty or penalty.

Demand and penalty for alleged clandestine removal were found unsustainable where the case rested mainly on recovery of fabrics from a trader's premises and statements recorded there, without search of the appellant's factory or independent corroboration. The shop proprietor's statement was treated as that of a co-accused and was not inherently reliable, while the excise in-charge's statement did not match the proprietor's version. No direct evidence linked the disputed goods to the appellant's factory, and the Director or partner was not examined. In the absence of tangible, corroborative material, the benefit of doubt went to the appellant and the appeal was allowed.

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Issues: Whether the demand of duty and penalty could be sustained on the basis of recovery of fabrics from a trader's premises and statements recorded therefrom, in the absence of search of the appellant's factory, corroborative evidence, or reliable proof of clandestine removal.

Analysis: The evidence relied upon consisted principally of the statement of the shop proprietor and recovery of fabrics from a second shop, along with the statement of the appellant's excise in-charge. The statement of the shop proprietor was treated as that of a co-accused and was not regarded as inherently reliable. The statement of the excise in-charge also did not tally with the quantities spoken to by the proprietor, and no corroborative evidence was produced to connect the disputed goods with the appellant's factory. The factory premises were not searched, the Director or partner was not examined, and no independent material established clandestine removal. In the absence of tangible and corroborative evidence, the departmental case was held to rest on an insufficient evidentiary foundation.

Conclusion: The demand and penalty were not sustainable; benefit of doubt was given to the appellant and the appeal was allowed.

Ratio Decidendi: Allegations of clandestine removal and allied penalty cannot be sustained on uncorroborated statements or recoveries from third-party premises unless supported by reliable independent evidence linking the goods to the assessee.

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