Clandestine removal demands need cross-examined statements and independent corroboration; untested records alone cannot sustain duty liability.

Employee statements relied on for a clandestine removal demand must be tested by cross-examination; where that opportunity is denied, the statements cannot be used against the assessee. Allegations of clandestine manufacture and removal must also be proved by reliable, independently corroborated evidence, such as raw-material movement, transport records, electricity use, buyer confirmation, or flow of funds. Unverified private records and computer data from an alleged secret office, without supporting investigation, were insufficient. On that footing, the duty demand and equivalent penalties were not sustainable.

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Issues: (i) Whether denial of cross-examination of the employees whose statements were relied upon vitiated the demand. (ii) Whether the allegation of clandestine manufacture and removal was proved by reliable and corroborative evidence.

Issue (i): Whether denial of cross-examination of the employees whose statements were relied upon vitiated the demand.

Analysis: The demand substantially rested on inculpatory statements of the plant in-charge and dispatch clerk. Their veracity could be tested only through cross-examination, especially when their statements were used to connect the appellant with the alleged secret office and alleged clearances. Denial of that opportunity was held to be contrary to settled principles of evidence and natural justice, and the statements were not treated as reliable material.

Conclusion: The denial of cross-examination rendered the relied-upon statements unusable against the assessee.

Issue (ii): Whether the allegation of clandestine manufacture and removal was proved by reliable and corroborative evidence.

Analysis: The alleged clandestine activity was sought to be established mainly from documents and computer data recovered from an alleged secret office, some packing slips, and matching production entries. The material was found to be uncorroborated by evidence of raw-material procurement, transport, electricity consumption, buyers' confirmation, flow of funds, or seizure of goods. No meaningful investigation was made at the buyer end or with alleged transporters, and the records recovered from the disputed premises were not independently proved by their author. The burden to establish clandestine removal was held to lie on the department, and that burden was not discharged.

Conclusion: The charge of clandestine manufacture and removal was not proved.

Final Conclusion: The duty demand and equivalent penalties could not be sustained, and the appeals were allowed with consequential relief.

Ratio Decidendi: A demand for clandestine removal cannot rest on untested employee statements and uncorroborated private records; the department must establish the charge through reliable, independently supported evidence.

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