Clandestine removal requires corroborative evidence; internal issue notes alone were insufficient to sustain duty demand and penalties.

Demand for duty and penalties based only on internal issue notes was rejected because the records were not independently corroborated and some related to other units, undermining their reliability. The alleged clandestine manufacture and removal was not supported by evidence of unaccounted raw material, abnormal electricity use, worker statements, transport documents, octroi, sales tax or barrier records, or enquiries from buyers. The burden remained on the Revenue to prove clandestine removal, and private documents alone were held insufficient. The duty demand and penalties were set aside.

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Issues: Whether the demand of duty and penalties could be sustained on the basis of internal issue notes allegedly recovered from the factory, in the absence of corroborative evidence of clandestine manufacture and removal.

Analysis: The Revenue's case rested substantially on internal issue notes. Some of those notes were found to relate to other similarly situated units, which cast doubt on the source and reliability of the documents. The issue notes were explained as internal directions for supply and could not, by themselves, be matched exactly with gate passes because clearances might be split over different days depending on availability and logistics. No supporting evidence was brought on record regarding unaccounted raw material, abnormal electricity consumption, statements of workers, transport documents, octroi, sales tax or barrier records, or any enquiry from the named buyers. The burden of proving clandestine removal lay on the Revenue, and private records without independent corroboration were insufficient to establish the charge.

Conclusion: The demand of duty and the penalties were not sustainable and were set aside.

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