Estimated electricity use cannot prove clandestine removal without corroboration; duty and penalties were set aside

Demand based on estimated electricity consumption and an expert formula for alleged clandestine manufacture and removal was found unsustainable where no trial run, dependable benchmark, or adequate technical basis supported the estimate. Retracted or unsupported witness statements, unproved computer printouts, and the absence of tangible evidence of transport, sale proceeds, excess stock, or actual clearance left the allegations uncorroborated. Clandestine removal cannot be established on a purely theoretical basis over a long period, and suspicion cannot replace legal proof; the duty, interest, and penalties were therefore set aside.

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Issues: Whether demand of duty, interest and penalties for alleged clandestine manufacture and clearance of steel ingots and CTD bars could be sustained on the basis of estimated electricity consumption and expert opinion, without reliable corroborative evidence.

Analysis: The demand was founded mainly on power-consumption norms worked out by an expert, together with statements, computer printouts and alleged unaccounted scrap purchases. The expert opinion was found unsafe to rely upon because no trial run was conducted, no standard technical literature or reliable benchmark was shown, the age and nature of the furnaces and the variations in raw material and operating conditions were not adequately accounted for, and the assessee had produced a contrary technical opinion which was not properly dealt with. The alleged corroborative material was also weak: the scrap dealers retracted or did not support the allegations in cross-examination, the computer printout was not proved as reliable evidence of clandestine clearances, and there was no tangible evidence of transport, sale proceeds, excess stock, or physical clearance of goods. The Court held that clandestine removal cannot be established on a purely theoretical or estimated basis for a long period without corroboration, and that suspicion, however strong, cannot replace legal proof.

Conclusion: The demands of duty, interest and penalties were not sustainable and were set aside in favour of the assessee.

Ratio Decidendi: Clandestine manufacture and removal cannot be upheld solely on estimated electricity consumption or an uncorroborated expert formula; reliable corroborative evidence is required to sustain duty demands and penalties.

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