Clandestine removal cannot be proved by untested supplier statements alone when no documentary evidence corroborates the excise demand.

Central excise duty and a finding of clandestine removal cannot be sustained where the department relies only on uncorroborated statements of suppliers, without cross-examination and without supporting documentary evidence. Here, no independent invoices, bills or other records were produced to establish purchase of raw materials, manufacture of branded biris, or clearance without duty. Because the statements were not disclosed to the assessee and were not tested by cross-examination, they could not form the sole basis for fastening duty liability. The demand was therefore held unsustainable and the adverse finding was rejected.

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Issues: Whether the demand of central excise duty and the finding of clandestine removal could be sustained on the basis of uncorroborated statements of suppliers without cross-examination and without supporting documentary evidence, in the light of Notification No. 8/96 dated 23-7-1996.

Analysis: The assessment was founded only on statements of suppliers of labels and tobacco. No independent documents, invoices or bills were produced to establish purchase of raw materials, manufacture of branded biris, or clearance without payment of duty. The statements were not shown to the assessee and no opportunity of cross-examination was granted. In the absence of corroboration, such statements could not form the sole basis for fastening duty liability or alleging clandestine manufacture and removal.

Conclusion: The demand was not sustainable and the finding against the assessee was rejected.

Ratio Decidendi: A finding of clandestine removal cannot rest solely on uncorroborated third-party statements that were not tested by cross-examination and are unsupported by independent documentary evidence.

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