Clandestine removal claims need independent corroboration; private records alone were insufficient, but confiscation of goods was upheld.

Detergent cakes found outside the bonded store room were held liable to confiscation because they were fit for entry in RG 1, and the related security appropriation and small penalty were upheld. By contrast, the demand based on alleged clandestine removal failed because private records alone did not prove unaccounted production or removal; the records served a different purpose, statutory entries were sometimes higher, and there was no independent evidence of raw material consumption, manufacture, or sale. On that basis, the duty demand and major penalty were set aside, while the confiscation finding and connected penalty were maintained.

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Issues: (i) Whether 472 cartons of detergent cakes found outside the bonded store room were liable to confiscation and whether the security amount of Rs. 5,000 and penalty of Rs. 1,000 were sustainable. (ii) Whether the demand of duty of Rs. 7,77,460.93 and penalty of Rs. 60,000 on the alleged clandestine removal of detergent cakes were sustainable.

Issue (i): Whether 472 cartons of detergent cakes found outside the bonded store room were liable to confiscation and whether the security amount of Rs. 5,000 and penalty of Rs. 1,000 were sustainable.

Analysis: The goods in question were found duly taped and sealed, and the Collector had already given the appellants the benefit for 905 cartons not yet fit for entry in RG 1. On the facts, the cartons found were fit to be entered in RG 1 as stock in the finishing room, and there was no basis to disturb the finding that they were liable to confiscation. Since the goods had been provisionally released under bond, appropriation of the security and the penalty were examined only in relation to this confirmed contravention.

Conclusion: The finding of confiscability, appropriation of Rs. 5,000, and penalty of Rs. 1,000 were upheld against the assessee.

Issue (ii): Whether the demand of duty of Rs. 7,77,460.93 and penalty of Rs. 60,000 on the alleged clandestine removal of detergent cakes were sustainable.

Analysis: The private records were shown to be maintained for purposes different from RG 1, and the production superintendent's statement indicated that production could not be determined with precision from those private accounts. The fact that RG 1 figures were in several instances greater than the private entries made it unsafe to infer, without more, that the private-record production had not been accounted for in RG 1. In the absence of further evidence such as proof of raw material consumption or sale of the alleged excess goods, the charge of clandestine removal was not established.

Conclusion: The demand of duty and the penalty were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded only in relation to the demand of duty and the major penalty, while the finding of confiscation and the connected small penalty were maintained.

Ratio Decidendi: Allegations of clandestine removal cannot be sustained merely on discrepancies between private records and statutory records unless supported by independent corroborative evidence of production, consumption, or sale.

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