Clandestine removal allegations fail where reprocessing losses are explained and no tangible evidence of secret clearance exists.

Allegations of clandestine removal based on high reprocessing losses in brown sugar failed where the department relied mainly on the loss percentage and did not address the molasses admittedly generated during the process. The assessee had explained the losses and regularly filed returns without suppression, while the record contained no cogent or tangible evidence of secret removal. The explanation for abnormal loss was accepted, and the demand of duty, interest and penalty was therefore set aside and the appellate order was upheld.

---

---

Issues: Whether the demand of duty, interest and penalty could be sustained on the allegation of clandestine removal arising from high reprocessing losses in brown sugar.

Analysis: The department's case rested on the percentage of loss noticed during reprocessing, but it did not deal with the molasses admittedly produced during the process. The assessee had furnished explanations for the losses and had been filing returns without suppression. The material on record did not disclose any cogent or tangible evidence to establish clandestine removal, and the finding of the Commissioner (Appeals) that the explanation for abnormal loss was acceptable remained unshaken.

Conclusion: The allegation of clandestine removal was not proved, and the order setting aside the demand and penalty was upheld.

---