Clandestine removal needs corroborated evidence; untested private ledger entries and arbitrary power norms cannot sustain demand.

Uncorroborated third-party private ledger entries, without cross-examination of the maker or other independent evidence, were held insufficient to sustain an allegation of clandestine removal of MS Ingots. The estimated production and consequential duty demand based on an assumed power-consumption norm and capacity figures were also found unsustainable, because no unit-specific study, test, or tangible supporting material showed that the appellant had suppressed production or clearances. In the absence of reliable corroboration such as unaccounted raw material purchases or other proof of clandestine manufacture and removal, the demand, penalty, and interest were set aside.

---

---

Issues: (i) Whether alleged clandestine removal of MS Ingots could be sustained solely on the basis of entries in a third party private ledger without cross-examination or independent corroboration; (ii) Whether the duty demand could be upheld by estimating production from an assumed power-consumption norm and capacity figures without any unit-specific study or tangible supporting evidence.

Issue (i): Whether alleged clandestine removal of MS Ingots could be sustained solely on the basis of entries in a third party private ledger without cross-examination or independent corroboration.

Analysis: The entries relied upon were recovered from the premises of a buyer and related to transactions allegedly with the appellant. No opportunity was granted to cross-examine the maker of the private ledger or the supervising person, and the ledger entries were not supported by any independent evidence. In such circumstances, a third-party record by itself could not form a safe basis to fasten liability for clandestine clearance.

Conclusion: The allegation of clandestine removal could not be sustained on the basis of the private ledger entries alone.

Issue (ii): Whether the duty demand could be upheld by estimating production from an assumed power-consumption norm and capacity figures without any unit-specific study or tangible supporting evidence.

Analysis: The estimated production was founded on a norm of 689 units per MT, although the appellant's actual consumption varied materially and no test, study, or experiment was conducted in the appellant's unit. The assumed norm of another unit could not be transplanted without a unit-specific basis. The record also did not disclose corroborative evidence such as unaccounted raw material purchases or other tangible proof of clandestine manufacture and removal. The installed capacity position further weakened the estimate, since the furnace capacity changed during the relevant period and the recorded production was not shown to be impossible on that basis.

Conclusion: The production estimate and the consequential duty demand based on assumed power consumption were not sustainable.

Final Conclusion: The demand, penalty, and interest were set aside because the Department failed to establish clandestine manufacture and removal with reliable, corroborated evidence.

Ratio Decidendi: Clandestine removal cannot be inferred from uncorroborated third-party records or from an arbitrary power-consumption norm applied without unit-specific verification and independent evidence.

---