Clandestine removal demands need corroborative evidence, not just electricity norms or suspicious accounting entries.

A demand for clandestine manufacture and clearance of MS ingots cannot be sustained on electricity consumption norms or suspected accounting entries alone. The Tribunal reiterated that such allegations require independent corroboration, including evidence of raw material procurement, transport, buyers, sale receipts, and clearance of finished goods. It also followed the view that excise authorities cannot displace audited statutory records and income-tax returns on conjecture. As the record contained no material beyond the same electricity-based inference and financial entries, the earlier ratio was applied and the demand and penalties were set aside.

---

---

Issues: Whether the demand of duty and penalties for alleged clandestine manufacture and clearance of MS ingots could be sustained on the basis of electricity consumption norms, alleged fictitious other income, and absence of corroborative evidence.

Analysis: The appeals arose from a common order confirming duty and imposing penalties, including penalties under Rule 26. The Revenue relied on an opinion regarding expected electricity consumption in induction furnaces and on alleged bogus share trading and sales commission entries to infer suppressed production. The decision turned on whether these circumstances, without more, could establish clandestine manufacture and removal. The Tribunal found that the issue was already settled by an earlier decision involving identical facts, where it had been held that, in the absence of evidence such as procurement of raw material, transport of raw material, transport documents, details of payments, identity of buyers, proof of sales receipts, or transport of the final product, the case rested only on conjecture. It also followed the earlier view that excise authorities could not, on those facts, sit in judgment over audited statutory records and income-tax returns. As the present case contained virtually no additional evidence beyond the same electricity-based inference and financial entries, the earlier ratio was applied.

Conclusion: The allegation of clandestine manufacture and clearance was not proved, and the duty demand and penalties could not stand.

Final Conclusion: The impugned orders were set aside and all appeals were allowed with consequential relief to the appellants.

Ratio Decidendi: A demand for clandestine removal cannot rest merely on excess electricity consumption or suspected accounting entries unless it is corroborated by independent evidence of raw material procurement, transport, buyers, receipts, and clearance of finished goods.

---