Clandestine removal demands need corroborative evidence linking raw materials, manufacture and clearance; theoretical calculations alone are insufficient.

A demand alleging clandestine manufacture and removal of acid slurry cannot rest on statements, private records, or theoretical calculations unless corroborated by reliable evidence showing procurement of both raw materials, actual manufacture, clearance, and removal of the finished goods. The text notes that the alleged demand failed because direct documentary support from the principal supplier was absent, the second raw material was not established, and the projected production figures were not proved by actual evidence. It also states that a solitary seizure of a small quantity in transit could not sustain the entire duty demand. The confiscation of the seized goods was upheld, while the penalty was reduced after the principal demand was set aside.

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Issues: Whether the demand of duty based on alleged clandestine manufacture and removal of acid slurry was sustainable, and whether the confiscation and penalty imposed on the appellants could be maintained in the absence of corroborative evidence.

Analysis: The alleged demand rested mainly on statements and records said to have been recovered from the supplier chain, but the record did not establish by reliable evidence that the appellants had received both essential raw materials in the quantities required for manufacture, or that the final product had been cleared clandestinely in the massive quantities alleged. The earlier remand had specifically required proof of procurement, manufacture, removal, and electricity consumption, yet the denovo order still failed to produce direct documentary corroboration from the principal supplier, failed to establish the second raw material, and did not substantiate the alleged production figures by actual evidence. A solitary seizure of a small quantity in transit could not justify the entire demand. The demand was therefore founded on assumptions and theoretical calculations rather than proof of clandestine manufacture and clearance. At the same time, the confiscation of the seized 449 kgs. of acid slurry was sustained, and the penalty on the partner was reduced in light of the setting aside of the principal duty demand.

Conclusion: The duty demand was unsustainable and was set aside. The confiscation of the seized goods was upheld. The penalty imposed on Shri A.R. Shanmugasundaram was reduced from Rs. 50,00,000 to Rs. 2,00,000.

Ratio Decidendi: A demand for clandestine manufacture and removal cannot be sustained merely on statements, private records, or theoretical calculations unless supported by corroborative evidence linking raw material procurement, manufacture, clearance, and actual transportation or removal of the finished goods.

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