Clandestine removal proof turns on loose sheets, statements and corroboration; majority found the demand unsustainable.

Recovered loose sheets, contemporaneous statements and statutory records were examined in a clandestine removal dispute. The majority held that the loose-sheet entries substantially tallied with the assessee's statutory records, the minor monthly differences were explained by loss and wastage, and the Revenue failed to produce corroborative evidence of buyers, transport or extra raw material. On that basis, the later retraction was treated as an afterthought and the oral confession alone was held insufficient to sustain duty and penalty. The dissent considered the admissions, recovered sheets, voluntary payment and surrounding circumstances adequate to prove clandestine removal on a preponderance of probability.

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Issues: Whether the demand of duty and penalty based on recovered loose sheets and inculpatory statements was sustainable, or whether the later retraction and comparison with statutory records rebutted the charge of clandestine removal.

Analysis: The majority found that the 14 loose sheets recovered from the residential premises were not isolated papers but were supported by the proprietor's contemporaneous statement and the authorised signatory's confirmation. The entries in the loose sheets were examined against the statutory records and found to tally substantially, with only minor monthly differences attributed to loss and wastage in manufacture. The Revenue did not dislodge the Commissioner (Appeals)'s factual finding that the entries matched the statutory record, nor did it produce corroborative material such as evidence of buyers, transport, or procurement of additional raw material to establish clandestine clearance. The later explanation and retraction were held to be an afterthought and, in the presence of documentary records supporting the assessee's case, the oral confession was not treated as sufficient by itself to sustain the demand.

Conclusion: The charge of clandestine removal was not proved and the demand of duty and penalty could not be sustained.

Dissenting Opinion: The Technical Member held that the contemporaneous admissions, unretracted authorised-signatory statement, recovered loose sheets, voluntary payment of duty, and surrounding circumstances established clandestine removal on a preponderance of probability. The later retraction after two years was treated as unreliable and insufficient to displace the original confession.

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