Clandestine manufacture demands tangible corroboration; incomplete verification and procedural lapses cannot sustain excise duty demand or penalty.

Clandestine manufacture and clearance of veneer and plywood must be supported by tangible, corroborative evidence; assumptions, incomplete verification, and uncorroborated documents are insufficient. The Revenue's case failed because purchase invoices and sales-tax returns indicating trading activity were not meaningfully investigated, there was no enquiry at the consignee or buyer level, and no proof that the goods were manufactured in the respondent's factory. Reliance on a single invoice, vehicle capacity, and estimated quantities without proof of grade, size, thickness, or actual delivery particulars was inadequate. A procedural lapse under Rule 51A of the Central Excise Rules, 1944 did not, on these facts, sustain the duty demand or penalty.

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Issues: Whether the Revenue had established, with reliable and tangible evidence, that the respondent had manufactured and cleared veneer and plywood without payment of duty, and whether the alleged non-compliance with Rule 51A of the Central Excise Rules, 1944 justified confirmation of the duty demand and penalty.

Analysis: The Revenue's demand was found to rest substantially on assumptions, incomplete verification, and uncorroborated documents. The record showed recovery of purchase invoices for traded goods, sales-tax returns reflecting trading activity, and a substantial price difference between purchase and sale, but these aspects were not properly investigated. There was no meaningful verification at the consignee's end, no enquiry as to the buyers, and no evidence proving manufacture of the goods in the respondent's factory. The remaining demands were also worked out from a single invoice and vehicle capacity, without proof of grade, size, thickness, quantity, or actual delivery particulars. On these facts, the omission regarding Rule 51A was only procedural and did not justify sustaining the duty demand.

Conclusion: The Revenue failed to prove clandestine manufacture or clearance, and the duty demand and penalty could not be upheld.

Ratio Decidendi: A duty demand for clandestine manufacture and clearance must rest on tangible and corroborative evidence, and suspicion or incomplete investigation cannot substitute proof.

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