Clandestine removal demands need cogent proof; accounting discrepancies alone do not justify duty demand or extended limitation.

Clandestine removal in excise cannot be inferred merely from discrepancies between annual financial accounts and RT-12 returns when the assessee has satisfactorily explained the variation; the Revenue must prove unaccounted clearance with cogent evidence, and the demand was therefore unsustainable. Extended limitation also cannot be invoked in the absence of suppression or concealment, particularly where the financial accounts were circulated shortly after year-end and the record did not show deliberate withholding of material facts; the longer period was accordingly held unavailable. The impugned order was set aside and consequential relief followed.

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Issues: (i) Whether the demand of excise duty could be sustained on the basis of discrepancy between annual financial accounts and RT-12 returns, on an allegation of clandestine removal; (ii) Whether the longer period of limitation could be invoked in the absence of suppression.

Issue (i): Whether the demand of excise duty could be sustained on the basis of discrepancy between annual financial accounts and RT-12 returns, on an allegation of clandestine removal.

Analysis: The recorded facts showed that the demand rested on differences between production figures in the annual financial accounts and those reflected in the monthly returns. The Tribunal followed its earlier decision on identical facts and held that clandestine manufacture and removal cannot be inferred merely from such difference when the assessee has satisfactorily explained the variation. The burden to prove clandestine clearance lies on the Revenue, and there was no sufficient evidence of unaccounted removals without duty payment.

Conclusion: The allegation of clandestine removal was not established and the duty demand was not sustainable.

Issue (ii): Whether the longer period of limitation could be invoked in the absence of suppression.

Analysis: The Tribunal accepted that the annual financial accounts were circulated within a short period after the close of the financial year and that the facts on record did not show suppression or concealment by the assessee. On that basis, invocation of the extended limitation period was held to be unjustified.

Conclusion: The extended period of limitation could not be invoked.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: A demand alleging clandestine removal cannot be sustained on the basis of accounting discrepancies alone unless the Revenue proves, by cogent evidence, unaccounted clearance and suppression warranting the extended period of limitation.

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