Clandestine removal cannot rest on electricity-based estimates alone without tangible corroborative evidence, and the demand failed.

Duty demand and penalties based on alleged excess electricity consumption failed because the department relied on theoretical estimates rather than tangible proof of clandestine manufacture and clearance. The assessee's explanations for higher power use, including voltage fluctuations, raw material quality, and furnace conditions, were not effectively rebutted, and correspondence with the electricity board supported voltage fluctuation. Driver statements also lost evidentiary value, and stock discrepancies had already been rejected as estimate-based. Suspicion from electricity consumption could not replace corroborative evidence, so the demand and penalties were set aside.

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Issues: Whether a demand of duty and penalties could be sustained on the basis of alleged excess electricity consumption and connected statements, in the absence of solid corroborative evidence of clandestine manufacture and clearance.

Analysis: The demand was founded substantially on a theoretical calculation drawn from electricity consumption and estimated yield. The record showed that the assessee had offered explanations for higher power consumption, including voltage fluctuations, quality of raw material, and furnace conditions, and these explanations were not adequately rebutted. The correspondence with the electricity board supported the existence of voltage fluctuation. The statements of the drivers lost evidentiary value in view of the outcome of proceedings against the alleged recipient units on the same set of facts. The excess and shortage at stock verification had also already been set aside as based on estimate. The Tribunal held that excess electricity consumption may create suspicion, but suspicion cannot substitute proof, and the department had not produced solid evidence of clandestine removal.

Conclusion: The duty demand was unsustainable and the penalties could not survive. The appeals were allowed in favour of the assessee.

Ratio Decidendi: Clandestine removal cannot be established on the basis of theoretical electricity-based estimates or mere suspicion alone and must be supported by tangible corroborative evidence.

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