Clandestine removal cannot rest on mere stock shortage without corroborative evidence; confiscation and duty demand were unsustainable.

Confiscation of excess raw material was unjustified where the material was found inside the factory and was explained as segregated scrap from duty-free imports. Alleged shortage of finished goods, by itself, did not establish clandestine removal because the record lacked corroborative evidence of removal, sale, transport, or other positive material, and the Revenue failed to discharge its burden. The duty demand, penalty and redemption fine were therefore not sustainable.

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Issues: Whether confiscation of excess raw material, and confirmation of duty, penalty and redemption fine on the basis of stock shortage and alleged clandestine removal, were sustainable.

Analysis: The excess quantity of raw material was found inside the factory and was explained as segregated material arising from duty-free imported scrap; on that basis, confiscation of the raw material was not justified. The alleged shortage of finished goods was also not sufficient by itself to establish clandestine removal, particularly when the case rested only on the visit and there was no corroborative evidence of removal, sale, transport, or any other positive material. The burden to prove clandestine clearance lay on the Revenue and was not discharged by mere shortage, especially where the physical verification was not shown to have been made by a reliable method.

Conclusion: The confiscation, duty demand, penalty and redemption fine were not sustainable.

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