Clandestine removal requires corroboration; unverified sales data and unsupported input shortages cannot sustain duty, confiscation, or penalty.

A charge of clandestine manufacture or removal cannot rest on a single uncorroborated source, and independent evidence of procurement, consumption, production or removal is required before duty, confiscation or penalty can be sustained. Computerised sales figures from a franchise holder were treated as unreliable because they were not cross-checked with the assessee and lacked supporting evidence such as higher raw material use or extra sale proceeds, so the duty demand and confiscation failed. On the alleged non-accountal of beverage base, contemporaneous drainage intimation, observed wastage, and unshaken records undermined the shortage allegation, and the duty demand and penalty were also rejected.

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Issues: (i) Whether the demand of duty and confiscation based on computerised sales figures obtained from the franchise holder could be sustained without corroborative evidence of clandestine manufacture and removal; (ii) Whether the duty demand and penalty based on alleged non-accountal of non-alcoholic beverage base could be sustained in view of the evidence of drainage, wastage, excess consumption and the assessees' records.

Issue (i): Whether the demand of duty and confiscation based on computerised sales figures obtained from the franchise holder could be sustained without corroborative evidence of clandestine manufacture and removal.

Analysis: The computerised sales sheets recovered from the franchise holder were not found to be sufficiently reliable by themselves. There was no written report from the assessee showing that the figures were ever sent to the franchise holder, the statements of the franchise personnel were not fully harmonious, and the figures had not been confirmed or cross-checked with the assessee. The charge of clandestine removal required corroboration by independent evidence such as procurement and use of additional raw materials, higher power consumption, or proof of extra sale proceeds. No such supporting evidence was produced.

Conclusion: The duty demand founded on the computerised sales figures was not sustainable, and the confiscation of the seized goods and cash was not justified.

Issue (ii): Whether the duty demand and penalty based on alleged non-accountal of non-alcoholic beverage base could be sustained in view of the evidence of drainage, wastage, excess consumption and the assessees' records.

Analysis: The record contained contemporaneous letters intimating the department about drainage of concentrate, evidence of drainage in the presence of excise officers and franchise representatives, and explanations for wastage due to storage and refrigeration problems as well as excess use caused by the nature of the water. The assessees' records, including the later statutory records, were not discredited by the department. The alleged shortage could not be treated as proof of clandestine manufacture merely on the basis of one input, particularly when the department failed to establish procurement of the other essential inputs required for production.

Conclusion: The demand of duty and the penalty based on alleged non-accountal of concentrate were not sustainable.

Final Conclusion: The entire basis of the duty demand and penalty failed for want of reliable and corroborated evidence of clandestine manufacture or removal, and the assessees succeeded in both appeals.

Ratio Decidendi: A charge of clandestine removal cannot be sustained on the basis of a single uncorroborated material; independent evidence of manufacture, procurement, consumption, or removal is necessary before duty, confiscation or penalty can be upheld.

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