Clandestine removal and small-scale exemption limits: contemporaneous records and statements sustained duty demand, but common directorship did not prove related persons.

Contemporaneous production cards, missing statutory entries, absent quality-control records and recorded statements were sufficient to establish clandestine removal, and a later retraction did not erase that evidentiary value. A mere common director was insufficient to prove related-person status for valuation because mutuality of interest or legally significant common control was not shown. Small-scale exemption was unavailable because prior clearances exceeded the threshold, and the clandestine clearances pushed turnover further beyond the limit. The duty demand was sustained on the clandestine removal and exemption issues, while the related-person valuation finding was set aside.

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Issues: (i) whether clandestine removal of excisable goods was established on the basis of recovered production cards, contemporaneous statements and surrounding circumstances; (ii) whether the assessee and the buyer concern were related persons for valuation purposes; and (iii) whether the assessee was entitled to small-scale exemption for the relevant period.

Issue (i): whether clandestine removal of excisable goods was established on the basis of recovered production cards, contemporaneous statements and surrounding circumstances.

Analysis: The evidence relied upon included production cards bearing M-series numbers, the absence of corresponding entries in statutory records, the lack of any maintained quality-control records, and statements recorded under the Central Excise Act. The explanation that the cards were used for rectification and later destroyed was found unsupported by records. Retraction of the statement after issuance of the show-cause notice did not displace the evidentiary value of the contemporaneous material.

Conclusion: Clandestine removal was proved against the assessee.

Issue (ii): whether the assessee and the buyer concern were related persons for valuation purposes.

Analysis: The allegation of relationship rested only on the fact of a common director and not on evidence of shared control, subsidiary relationship, or mutuality of interest sufficient to attract the valuation rule. Mere commonality of one director was held insufficient to establish the statutory relationship.

Conclusion: The assessee and the buyer concern were not related persons.

Issue (iii): whether the assessee was entitled to small-scale exemption for the relevant period.

Analysis: The aggregate clearances for the preceding year exceeded the exemption limit. Once the clandestinely removed clearances were also taken into account, the turnover was clearly beyond the statutory threshold, making the assessee ineligible for the concessional rate during the relevant period.

Conclusion: The assessee was not entitled to small-scale exemption.

Final Conclusion: The duty demand was sustained substantially on the clandestine removal issue and the exemption issue, while the finding on related-person valuation was set aside.

Ratio Decidendi: Contemporaneous documentary evidence and recorded statements can establish clandestine removal, but related-person status requires proof of mutuality of interest or legally significant common control and cannot be inferred from a mere common director.

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