Uncorroborated evidence and denied cross-examination cannot sustain clandestine removal demands or confiscation under excise rules.

A demand for duty, interest and penalties based on a pocket diary, disputed statements and transporter records was unsustainable where material discrepancies existed, cross-examination of the transporters was denied, and no reliable independent corroboration proved clandestine manufacture or removal. The demand was set aside. Confiscation of seized goods, plant and machinery, and the redemption fine were also unsustainable because the statutory ingredients for confiscation under Rule 173Q were not established on reliable evidence, and the basis for confiscation failed once clandestine removal was not proved. These confiscation and fine orders were set aside.

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Issues: (i) Whether the demand of duty, interest and penalties based on the pocket diary, statements and transporter records was sustainable in the absence of proper cross-examination and corroborative material. (ii) Whether confiscation of seized goods, plant and machinery, and imposition of redemption fine were sustainable under the Central Excise Rules, 1944.

Issue (i): Whether the demand of duty, interest and penalties based on the pocket diary, statements and transporter records was sustainable in the absence of proper cross-examination and corroborative material.

Analysis: The demand was founded mainly on the pocket diary, the statements recorded from the partner and the excise clerk, and the transporter records. The record showed material discrepancies between the pocket diary and the transporter documents, and the transporters were not allowed to be cross-examined. The adjudication also rested on statements that were later disowned in the course of the proceedings. The materials on record did not furnish reliable, independent corroboration of clandestine manufacture or removal.

Conclusion: The demand of duty, interest and penalties was not sustainable and was set aside.

Issue (ii): Whether confiscation of seized goods, plant and machinery, and imposition of redemption fine were sustainable under the Central Excise Rules, 1944.

Analysis: Confiscation under Rule 173Q required satisfaction of the statutory ingredients, but the seized goods included raw material and semi-processed goods in respect of which the requisite basis for confiscation was not established. Since clandestine removal was not proved on reliable evidence and the appellant had not availed credit on the seized raw materials, the basis for confiscation and redemption fine was absent. The confiscation of plant and machinery was also unsupported on the facts found.

Conclusion: Confiscation and redemption fine were not sustainable and were set aside.

Final Conclusion: The impugned adjudication could not survive judicial scrutiny because the alleged clandestine activity was not proved by trustworthy and corroborated evidence, and the confiscation orders lacked the necessary statutory foundation.

Ratio Decidendi: A demand for clandestine removal cannot be sustained on the basis of an uncorroborated pocket diary and disputed statements when cross-examination of material witnesses is denied; confiscation under Rule 173Q requires proof of the statutory ingredients on reliable evidence.

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