Clandestine removal demands need positive corroboration; electricity-consumption estimates alone cannot sustain excise duty liability.

A central excise duty demand based only on deemed production from electricity consumption and a third-party technical report could not stand because clandestine manufacture and removal must be proved by positive, tangible and corroborative evidence. The record lacked evidence of unaccounted raw material, transport of clandestinely cleared goods, sale proceeds, flow back, parallel accounts, or incriminating statements, while contrary departmental material indicated higher electricity use. The power-consumption methodology alone was held insufficient, and the demand was set aside.

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Issues: Whether the demand of central excise duty could be sustained solely on the basis of deemed production inferred from electricity consumption and a third-party technical report, in the absence of corroborative evidence of unaccounted raw material, clandestine manufacture, and clandestine clearance.

Analysis: The demand was founded principally on an external benchmark of electricity consumption. The record also contained contrary material, including departmental trial-run verification and other reports indicating higher electricity consumption, while no incriminating statement or direct evidence of procurement of unaccounted raw material, transport of clandestinely cleared goods, sale proceeds, flow back, or parallel accounts was brought home. The prior decisions relied upon by the Revenue were distinguished on facts, as those cases involved independent corroborative evidence of clandestine removal, whereas the present matter rested substantially on assumptions drawn from power consumption alone. The legal position applied was that clandestine removal must be established by positive, tangible and corroborative evidence, and not by mere hypothesis or theoretical calculation.

Conclusion: The demand could not be sustained and the assessee succeeded on this issue.

Final Conclusion: The impugned orders were set aside because the Revenue failed to prove clandestine manufacture and clearance by acceptable evidence, and the electricity-consumption-based methodology by itself was held insufficient to uphold the duty demand.

Ratio Decidendi: A demand for clandestine removal cannot be upheld merely on estimated production derived from electricity consumption unless supported by positive, corroborative evidence of unaccounted raw material, manufacture, removal, and consideration.

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