Clandestine removal demands independent corroboration; electricity consumption alone cannot sustain excise duty and penalty.

A demand for central excise duty and penalty based mainly on electricity consumption, furnace log sheets and estimated production was not sustainable because the record lacked corroborative evidence of clandestine manufacture and removal. The Department had no seizure of goods or documents, no proof of excess raw material procurement, no identified buyers, no transport evidence, no financial trail, no bank records and no test-run data. The ruling states that clandestine removal must be proved by tangible, independent evidence and cannot rest on suspicion, presumption or conjecture alone; the appeal was allowed and consequential relief followed.

---

---

Issues: Whether demand of central excise duty and penalty based primarily on electricity consumption and furnace log sheets could be sustained in the absence of corroborative evidence of clandestine manufacture and removal.

Analysis: The demand rested on theoretical computation from electricity usage, furnace log sheets, generator input, power factor and kWh readings. The available material did not include seizure of goods or documents, evidence of procurement of excess raw material, identification of buyers, proof of transport, financial trail, bank records, or test-run data. The Department relied on assumptions that electricity consumption necessarily reflected production, but the record did not establish that the whole power consumption was exclusively used for clandestine manufacture. In such cases, clandestine removal must be proved by the Revenue through tangible and corroborative evidence and cannot be upheld on suspicion, presumption or conjecture alone.

Conclusion: The duty demand and penalty were not sustainable.

Final Conclusion: The appeal was allowed and the impugned order was set aside, with consequential relief to the assessee.

Ratio Decidendi: A charge of clandestine manufacture and removal cannot be sustained merely on excess electricity consumption or estimated production unless it is supported by independent corroborative evidence proving actual manufacture and removal without payment of duty.

---