Clandestine duty demand requires corroboration; untested third-party records and unverified power norms cannot support suppressed production.

Clandestine duty demand cannot be sustained on private ledger entries from a third party or that party's statement alone when no independent corroboration is produced and cross-examination is denied. The supplier's admission in settlement proceedings did not, by itself, establish evasion by the assessee, so the demand failed on that basis. Production also could not be estimated by applying the power-consumption ratio of another rolling mill because no comparative study showed the units were comparable in technology or efficiency and the benchmark was therefore arbitrary. The order dropping the demand was sustained.

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Issues: (i) whether demand of duty could be sustained on the basis of private ledger entries recovered from a third party without allowing cross-examination and without independent corroboration; (ii) whether the assessee's production could be estimated by applying the power-consumption ratio of another rolling mill.

Issue (i): Whether demand of duty could be sustained on the basis of private ledger entries recovered from a third party without allowing cross-examination and without independent corroboration.

Analysis: The alleged receipt of unaccounted MS ingots rested only on the private ledger of the supplier and the supplier's statement. No independent evidence linked those entries to clandestine removal by the assessee, and cross-examination of the persons from whom the records were recovered was not allowed. Admission of duty evasion by the supplier in settlement proceedings could not, by itself, establish evasion by the assessee.

Conclusion: The demand could not be upheld on the basis of the third-party records and statements.

Issue (ii): Whether the assessee's production could be estimated by applying the power-consumption ratio of another rolling mill.

Analysis: The department adopted the power-consumption norm of another unit without any comparative study or experiment. The two units were not shown to be comparable in technology or efficiency, and the assessee's average consumption was consistent with technical material and governmental norms cited on record. In such circumstances, the benchmark of the other unit was held to be arbitrary and unreliable for estimating alleged suppressed production.

Conclusion: The production estimate based on the other unit's power-consumption ratio was not accepted.

Final Conclusion: The revenue failed to establish clandestine removal or suppressed production, and the order dropping the demand was sustained.

Ratio Decidendi: Clandestine duty demand cannot rest solely on uncorroborated third-party records or on an unverified comparison with another unit's power-consumption norm; reliable corroboration and comparability are required.

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