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Issues: Whether the demand of central excise duty, interest and penalties could be sustained where the allegation of clandestine clearance rested only on records and statements recovered from the assessee's customers, without corroborative evidence from the assessee's premises.
Analysis: The disputed cotton yarn was claimed to have been cleared as plain reel hanks under the exemption notification. The allegation that it was actually removed in cone form was based on third-party records and the statements of the customers' employees. No documents showing clearance in cone form were recovered from the assessee's premises, no admission to that effect was made by the director, and no independent inquiry was undertaken at the assessee's end. In such circumstances, reliance solely on third-party material was held to be unsafe for fastening duty liability.
Conclusion: The demand, interest and penalties were not sustainable and were set aside in favour of the assessee.
Final Conclusion: The appeals succeeded because the revenue failed to establish clandestine removal by reliable and corroborated evidence.
Ratio Decidendi: An excise demand based on alleged clandestine clearance cannot be sustained merely on uncorroborated third-party records and statements, in the absence of independent evidence linking the assessee to the alleged evasion.
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