Clandestine removal cannot rest on wastage discrepancies alone without independent proof of actual clearance.

Clandestine removal cannot be inferred solely from excess wastage shown in records when there is no independent evidence of actual clearance into the domestic market. The discrepancy between the ARE-2 declaration and the Form IV register, by itself, was treated as insufficient to sustain duty demand and penalties because there were no corroborative materials such as buyers, transport evidence, or other proof of removal. On that basis, the demand of duty and connected penalties were held unsustainable and the finding of clandestine clearance was set aside.

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Issues: Whether demand of duty and penalty could be sustained on the basis of excess wastage reflected in records, without independent evidence of clandestine clearance of duty-free procured fabrics.

Analysis: The demand rested essentially on the difference between the wastage declared in the ARE-2 declaration and the wastage shown in the Form IV register. The absence of other material indicating actual removal of the goods into the domestic market was significant. Mere excess wastage, without evidence of buyers, clearance, or other corroborative circumstances, was treated as insufficient to establish clandestine removal. The reasoning adopted below was found to be based on assumption rather than proof.

Conclusion: The demand of duty and the connected penalties were not sustainable, and the finding on clandestine removal was set aside in favour of the assessee.

Final Conclusion: The appeals succeeded because the alleged duty evasion was not proved by evidence beyond the discrepancy in wastage figures, and the impugned orders were set aside.

Ratio Decidendi: Clandestine removal cannot be inferred merely from excess wastage figures unless supported by independent and corroborative evidence of actual clearance.

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