Clandestine removal requires tangible corroborative evidence; unsupported loose papers and power readings cannot sustain duty demand.

Allegations of clandestine manufacture and removal must be proved by tangible, corroborative and independent evidence; loose papers without linkage to the assessee, unsupported DG set consumption calculations, and the absence of proof of raw material flow, transport, buyers or sale proceeds were insufficient, so the duty demand failed. Empty packing bags were not shown to be intended for clandestine clearance, so confiscation and redemption fine on those bags were set aside. However, 1210 cement bags had reached the RG-1 stage and were found ready for removal without duty payment, so confiscation and redemption fine on those bags were upheld. Personal penalties on the officials fell with the failed main demand and were set aside.

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Issues: (i) Whether the demand of central excise duty based on loose papers and DG set power-consumption readings could be sustained as proof of clandestine manufacture and removal; (ii) Whether confiscation and redemption fine in respect of 1962 empty bags were justified; (iii) Whether confiscation and redemption fine in respect of 1210 bags of cement were justified; (iv) Whether penalties on the company officials were sustainable.

Issue (i): Whether the demand of central excise duty based on loose papers and DG set power-consumption readings could be sustained as proof of clandestine manufacture and removal.

Analysis: The loose slips did not contain the name of the company, the factory, or the description of the goods, and no statement of the persons named in those slips was brought on record to connect them with the appellants. The department also adduced no corroborative evidence of raw-material procurement, production, transport, buyers, or receipt of sale proceeds. The duty demand based on a formula drawn from DG set consumption was held to be unsupported by any technical study or independent material. The settled standard applied was that clandestine manufacture and clearance must be proved by tangible and corroborative evidence, and not by suspicion, presumption, or theoretical calculations.

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

Issue (ii): Whether confiscation and redemption fine in respect of 1962 empty bags were justified.

Analysis: The empty bags were only packing material, and no material showed that they were intended for use in clandestine clearance of excisable goods. Mere non-entry of a small quantity of bags in the records was held insufficient to warrant confiscation and redemption fine.

Conclusion: The confiscation and redemption fine in respect of the empty bags were set aside in favour of the assessee.

Issue (iii): Whether confiscation and redemption fine in respect of 1210 bags of cement were justified.

Analysis: The bags had reached the RG-1 stage, were stitched, and were found ready for removal. The explanation that entry could not be made because a dealing clerk was absent was rejected. The contemporaneous statement and surrounding circumstances supported the finding that the bags were kept for removal without payment of duty.

Conclusion: The confiscation and redemption fine in respect of the 1210 bags were upheld against the assessee.

Issue (iv): Whether penalties on the company officials were sustainable.

Analysis: The penalties were founded on the alleged clandestine manufacture and removal. Once the main duty demand based on generator readings and loose papers failed, the basis for the personal penalties also failed. The confiscation relating to the 1210 bags did not sustain the separate penal liabilities imposed on the officials.

Conclusion: The penalties on the officials were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded on the principal duty demand, the confiscation of empty bags, and the personal penalties, but failed to the extent of the confiscation and redemption fine relating to the 1210 bags of cement.

Ratio Decidendi: Allegations of clandestine manufacture and removal must be proved by tangible, corroborative and independent evidence, and cannot rest on loose papers, presumptions, or theoretical power-consumption calculations alone.

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