Unaccounted raw material and clandestine removal: confiscation and penalties fail without evidence of intent to evade accounting.

Excess raw material was held not liable to confiscation where the stock discrepancy was explained by the absence of physical verification for about a month and no material showed an intention to clear the inputs clandestinely. The allegation that the excess ingots were meant to be converted into rolled products and removed without account remained unproved, so confiscation and the related penalties could not be sustained. Applying the same approach to unaccounted raw material, the Tribunal affirmed that penal action cannot rest on conjecture or presumption without evidence of clandestine removal. The confiscation and penalties were set aside and the Revenue's appeals were rejected.

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Issues: Whether excess stock of raw material was liable to confiscation and whether penalty could be sustained in the absence of evidence of clandestine removal.

Analysis: The discrepancy in stock was explained as arising from the absence of physical verification for about a month, and that explanation was not displaced by any material showing an intention to clear the inputs clandestinely. The allegation that the excess ingots were meant to be converted into rolled products and removed without accounting remained unsupported by evidence. In such circumstances, confiscation of the raw material and the consequential penalties could not be justified. The order of the Commissioner (Appeals) relied on the Tribunal's earlier view that similar provisions governing confiscation of unaccounted raw material were not attracted on such facts.

Conclusion: The confiscation and penalties were rightly set aside, and the Revenue's appeals were rejected.

Final Conclusion: In the absence of material proving clandestine removal, confiscation of excess inputs and the related penal action were unsustainable.

Ratio Decidendi: Unaccounted raw material cannot be confiscated and penal consequences cannot follow merely on conjecture or presumption unless there is evidence establishing an intention of clandestine removal.

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