Clandestine removal demands fail where statutory excise records account for the quantity and no reliable evidence proves unrecorded clearance.

A duty demand for alleged clandestine removal fails where the quantities are shown in statutory excise records and the department does not prove unaccounted clearance with reliable evidence. For polyester chips, the comparison with the balance sheet did not establish shortage or clandestine removal because the excise records reflected a higher closing balance. For P.P. chip waste, the disputed quantities were found to be polymer waste already accounted for in excise records and returns, so the foundation for duty demand disappeared. On that basis, the commentary notes that the duty, interest and penalty confirmations could not survive.

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Issues: (i) Whether the demand of duty on alleged clandestine removal of 35.075 MT of polyester chips during 1995-96 was sustainable; (ii) Whether the demand of duty on alleged clandestine removal of 167.818 MT of P.P. chip waste during 1994-95 and 1995-96 was sustainable.

Issue (i): Whether the demand of duty on alleged clandestine removal of 35.075 MT of polyester chips during 1995-96 was sustainable.

Analysis: The discrepancy was based on a comparison between the closing balance shown in the Central Excise records and the closing balance shown in the balance sheet. The recorded quantity in the statutory excise records was higher than the quantity reflected in the balance sheet. Liability for alleged unaccounted clearances must rest on shortages or removals not accounted for in the statutory records, and a higher balance in the excise records does not support a finding of clandestine clearance.

Conclusion: The demand on 35.075 MT of polyester chips was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the demand of duty on alleged clandestine removal of 167.818 MT of P.P. chip waste during 1994-95 and 1995-96 was sustainable.

Analysis: The record showed three distinct categories of waste arising at different stages of manufacture, namely polymer waste, chip waste, and yarn waste. The figures relied on by the department as P.P. chip waste were in fact polymer waste, and the verification by the Range Superintendent showed that such quantities were already accounted for in the excise records and returns. Once the foundation for treating the quantities as unaccounted chip waste failed, the duty demand could not survive.

Conclusion: The demand on 167.818 MT of P.P. chip waste was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The duty, interest, and penalty confirmations could not survive, and the appeal succeeded with the impugned order set aside.

Ratio Decidendi: A duty demand for alleged clandestine removal cannot be sustained where the quantities are accounted for in statutory excise records and the department fails to establish unaccounted removal on reliable evidence.

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