Clandestine removal demands need corroborative evidence; shortage estimates, printouts, and theoretical records were insufficient here.

Clandestine removal cannot be inferred from approximate dip measurement shortage alone where no actual weighing or corroborative evidence showed unaccounted clearances, so the duty demand was set aside. Computer-generated sheets, explained as tentative dispatch records and cancelled movements, also failed to prove clandestine clearance because there was no evidence of buyers, transporters, excess raw material, or sale proceeds, and that demand was likewise set aside. A theoretical comparison between statutory records and daily production records, without proof of actual removal or movement of goods, could not sustain duty or the connected penalty, so both were set aside and the appeals were allowed with consequential relief.

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Issues: (i) Whether duty demand could be sustained solely on the basis of stock shortage detected by dip measurement; (ii) Whether duty demand could be sustained on the basis of computer-generated sheets allegedly showing unaccounted clearances; (iii) Whether duty demand could be sustained on the basis of comparison between statutory records and daily production records, and whether penalty could survive.

Issue (i): Whether duty demand could be sustained solely on the basis of stock shortage detected by dip measurement;

Analysis: The shortage was found by visual/dip measurement without actual weighing. The method adopted was only approximate and could produce error because of the structure of the hopper and the manner in which sponge iron was stored and discharged. No independent inventory or other corroborative evidence established removal of goods without payment of duty. Mere shortage, particularly of a small percentage, was held insufficient to infer clandestine removal.

Conclusion: The demand based on shortage was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether duty demand could be sustained on the basis of computer-generated sheets allegedly showing unaccounted clearances;

Analysis: The computer printouts were explained as containing tentative dispatch entries, vehicle details and records of occasions when transport arrangements failed or dispatches were cancelled. Apart from the printouts, there was no evidence of buyers, transporters, excess raw material procurement, or receipt of sale consideration. The record did not establish clandestine clearance.

Conclusion: The demand based on the computer-generated sheets was not sustainable and was set aside in favour of the assessee.

Issue (iii): Whether duty demand could be sustained on the basis of comparison between statutory records and daily production records, and whether penalty could survive.

Analysis: The adjudicating authority itself accepted that sponge iron lumps recorded in RG-1 included sponge iron fines, and the alleged excess production rested on theoretical comparison rather than evidence of actual removal. There was no proof of movement of goods to buyers, transport evidence, or receipt of payment. In the absence of proof of clandestine removal, the consequential penalty could not stand.

Conclusion: The demand based on record comparison and the connected penalties were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The impugned order was set aside and all three appeals were allowed with consequential relief.

Ratio Decidendi: Clandestine removal cannot be sustained on shortage estimates, computer printouts, or theoretical record comparisons alone unless supported by independent corroborative evidence such as actual removal, buyer or transporter evidence, raw material flow, or receipt of consideration.

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