Clandestine removal demands direct evidence, and consequential penalties fall when the principal duty liability is not proved.

Allegations of clandestine removal require direct and positive evidence; corroborative or circumstantial material based only on statements of distributors' representatives was found insufficient to sustain the duty demand. The Tribunal's view that the record rested on surmises and conjectures was accepted, and no illegality or perversity was found in deleting the demand. Once the principal liability failed, the consequential penalties on the partner and others could not survive. The Revenue's challenge therefore failed, and the deletion of duty-related liabilities and penalties was left undisturbed.

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Issues: Whether duty demand and penalty could be sustained on the basis of corroborative and circumstantial evidence in the absence of direct and positive evidence of clandestine removal, and whether the penalty imposed on the partner was consequential to the fate of the principal demand.

Analysis: The Tribunal had examined the adjudication record and the evidence relied upon by the Revenue. It found that the case rested mainly on statements of representatives of distributors and did not contain direct evidence from the recipients of the goods to establish clandestine removal by the manufacturer in collusion with the dealer. On that appraisal, the Tribunal held that the demand of duty and the connected penalties were founded on surmises and conjectures. The Court found no illegality or perversity in that approach and agreed that, once the foundation of clandestine removal was not established, the penalty against the partner and others, being consequential, could not survive.

Conclusion: The Revenue's challenge failed. The demand of duty and the penalties were not restored, and the assessee succeeded.

Final Conclusion: The appeal did not disclose any substantial question of law warranting interference, and the Tribunal's deletion of the duty-related liabilities and consequential penalties was left undisturbed.

Ratio Decidendi: Allegations of clandestine removal must be proved by direct and positive evidence sufficient to sustain the demand, and consequential penalties cannot stand when the principal liability itself is not established.

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