Clandestine removal demands need corroborated evidence; unverified register entries fail, but seized production records and statements can sustain duty.

Clandestine removal must be supported by reliable and corroborated evidence linking seized documents or records to actual clearances. Entries in a miscellaneous outward register, without proof of authorship, custody linkage, or independent corroboration, were insufficient to sustain duty demand and were rejected. By contrast, documents recovered from the Director (Technical), together with his contemporaneous statement, were treated as credible evidence for the clearances covered by those records, so that demand was upheld for that limited segment. Alleged double invoicing and raw material shortage were not proved on the evidence, and those demands were set aside. The surviving demand was remanded only for fresh quantification and reconsideration of penalties.

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Issues: (i) whether entries in the miscellaneous outward register, by themselves, established clandestine manufacture and removal; (ii) whether the documents recovered from the Director (Technical) and his statement proved clandestine clearances; (iii) whether the alleged double invoicing and shortage of raw materials justified the duty demand; and (iv) whether the matter required remand for limited quantification and proportionate penalties.

Issue (i): whether entries in the miscellaneous outward register, by themselves, established clandestine manufacture and removal.

Analysis: The register was recovered from the factory, but the record did not show who maintained it or who authored the entries. No security personnel or other author of the entries was examined, and the entries were not supported by independent corroboration. In the absence of proof linking the register to the assessee's actual clearances, the entries could not be treated as conclusive evidence of clandestine removal.

Conclusion: The demand founded solely on the miscellaneous outward register was set aside in favour of the assessee.

Issue (ii): whether the documents recovered from the Director (Technical) and his statement proved clandestine clearances.

Analysis: The monthly production report and connected chits were recovered from the Director (Technical)'s cabin, and his contemporaneous statement accepted the contents as relating to goods cleared without accounting or duty payment. The retraction was belated, and the recovery from his custody, coupled with the statement, furnished reliable evidence of clandestine clearance for the items covered by those documents.

Conclusion: The duty demand relating to the goods covered by the recovered production records was upheld in favour of the Revenue.

Issue (iii): whether the alleged double invoicing and shortage of raw materials justified the duty demand.

Analysis: The two invoices bearing the same number were found to have been issued from the office, and the demand based on that alleged double invoicing was not sustained. As to the alleged shortage, the stock verification was not shown to have been done in a scientific manner, and the absence of a statement from the General Manager who was present at the time weakened the Revenue's case. The shortage was therefore not proved to the required standard.

Conclusion: The demands based on double invoicing and alleged raw material shortage were set aside in favour of the assessee.

Issue (iv): whether the matter required remand for limited quantification and proportionate penalties.

Analysis: Since only the demand founded on the documents recovered from the Director (Technical) survived, the exact duty attributable to those entries had to be worked out afresh. The penalties also had to be revisited proportionately after such quantification.

Conclusion: The matter was remanded to the adjudicating authority for limited quantification and consequential reconsideration of penalties.

Final Conclusion: The appeals succeeded in substantial part, with major demands being set aside, one segment of the clandestine removal demand being sustained, and the surviving portion sent back only for limited quantification and consequential penalty review.

Ratio Decidendi: Clandestine removal must be proved by reliable and corroborated evidence linking the seized material to the assessee's clearances, and uncorroborated private records or inadequately verified stock shortages cannot sustain duty demand.

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