Clandestine removal proved by circumstantial evidence and admissions, restoring duty demand, penalty and original adjudication.

Cumulative circumstantial evidence, including shortages of raw materials, private records, buyer admissions and corroborating statements, was treated as sufficient to establish clandestine manufacture and removal on a preponderance of evidence. On that basis, the majority upheld the Revenue's case, reversed the appellate relief and restored the original duty demand and consequential penalty. The note also records a dissent that would have limited proof to the established unaccounted clearances to one buyer, holding that the remaining demand rested only on presumption and was not independently proved.

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Issues: (i) Whether the Revenue had proved clandestine manufacture and removal of excisable goods on the basis of shortages of raw materials, private records, buyer admissions and other surrounding evidence; (ii) whether the duty demand and penalty sustained by the original adjudicating authority were liable to be restored.

Issue (i): Whether the Revenue had proved clandestine manufacture and removal of excisable goods on the basis of shortages of raw materials, private records, buyer admissions and other surrounding evidence.

Analysis: The majority held that the case was not one resting merely on assumption or presumption. The investigation had disclosed shortages of raw materials, recovery of private records, admissions by the buyer regarding receipt of unaccounted goods, and supporting statements showing clandestine clearances. These circumstances, read together, were found sufficient to establish unaccounted manufacture and removal on preponderance of evidence.

Conclusion: The issue was answered in favour of Revenue and against the assessee.

Issue (ii): Whether the duty demand and penalty sustained by the original adjudicating authority were liable to be restored.

Analysis: Once clandestine removal for the full quantity stood proved, the demand confirmed by the adjudicating authority was held sustainable. The majority therefore accepted the Revenue's challenge, set aside the relief granted by the appellate authority, and restored the original adjudication including the consequential penalty.

Conclusion: The issue was answered in favour of Revenue and against the assessee.

Final Conclusion: The impugned appellate relief was reversed and the original demand and penalty were restored on the basis of proved clandestine manufacture and removal.

Ratio Decidendi: Clandestine removal can be sustained on the basis of cumulative circumstantial evidence and admissions, and need not be proved by direct evidence of each individual clearance.

Dissenting Opinion: The Judicial Member held that, apart from established unaccounted clearances to one buyer, the remaining demand rested on presumption arising from shortages and did not stand proved by independent evidence; the appeal was therefore dismissed in that view.

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