Clandestine removal demands fail when based only on estimated consumption norms without tangible evidence; personal penalty also falls away.

A charge of clandestine removal cannot be sustained solely on estimated consumption derived from approximate technical norms where those standards allow variation and there is no tangible evidence of unaccounted clearance. On that basis, the demand for Modvat credit, interest and equal penalty was set aside. Where the substantive demand fails, a connected penalty on the Managing Director also cannot survive, and in any event personal penalty requires evidence of conscious dealing with excisable goods liable for confiscation; none was shown. The disputed demand and personal penalty were therefore vacated, while the uncontested confiscation and duty portions remained undisturbed.

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Issues: (i) Whether the demand of Modvat credit with interest and equivalent penalty could be sustained on the basis of alleged clandestine removal inferred only from consumption estimates derived from ISI standard approximate mass norms; (ii) Whether penalty on the Managing Director was sustainable after the principal demand was set aside.

Issue (i): Whether the demand of Modvat credit with interest and equivalent penalty could be sustained on the basis of alleged clandestine removal inferred only from consumption estimates derived from ISI standard approximate mass norms.

Analysis: The demand rested on a comparison between the appellant's recorded consumption of aluminium wire rod and the consumption worked out by the department from the approximate kilograms-per-kilometre values in the ISI standard for stranded aluminium conductors. Those norms were not exact figures; the standard itself contemplated variation in diameter and therefore in weight. The departmental computation showed excess consumption only for one year, while for the remaining years the recorded consumption was below the maximum possible consumption. In the absence of tangible evidence of unaccounted clearance, a finding of clandestine removal could not be drawn merely from such estimated consumption figures.

Conclusion: The demand of Modvat credit, interest, and equal penalty was not sustainable and was set aside.

Issue (ii): Whether penalty on the Managing Director was sustainable after the principal demand was set aside.

Analysis: Once the substantive demand founded on alleged clandestine removal failed, the basis for penal action also disappeared. In any event, penalty under Rule 209A required evidence of conscious dealing with excisable goods liable for confiscation, and no such evidence was found.

Conclusion: The penalty on the Managing Director was not sustainable and was set aside.

Final Conclusion: Relief was granted against the disputed demand and the connected personal penalty, while the uncontested confiscation and duty portions remained undisturbed.

Ratio Decidendi: A charge of clandestine removal cannot be sustained solely on estimated production or consumption norms based on approximate technical standards, and penal consequences cannot survive without tangible supporting evidence.

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