Clandestine removal demands need positive corroborative evidence; electricity consumption alone and unreasoned adjudication cannot sustain the case.

Allegations of clandestine removal of M.S. ingots cannot be upheld on electricity consumption pattern alone; the department must produce positive corroborative evidence such as unaccounted raw material, unrecorded production, stock variation, transport evidence, or buyer material, and reliance on general reports or theoretical norms was insufficient. The adjudication was also found defective because the authority did not properly deal with the assessee's principal defence or disclose reasons for rejecting the relied-upon material, amounting to breach of natural justice. The impugned decision was quashed and the matter remanded for fresh adjudication in accordance with law.

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Issues: (i) Whether an order confirming demand for alleged clandestine removal of M.S. ingots could be sustained primarily on electricity consumption pattern and the report relied upon by the department without adequate corroborative evidence. (ii) Whether the adjudication was vitiated for violation of natural justice and non-consideration of the main defence and relied-upon material.

Issue (i): Whether an order confirming demand for alleged clandestine removal of M.S. ingots could be sustained primarily on electricity consumption pattern and the report relied upon by the department without adequate corroborative evidence.

Analysis: Electricity consumption may at best be a corroborative circumstance. For fastening liability for clandestine removal, the department must bring positive and concrete evidence such as unaccounted raw material, unrecorded production, stock discrepancies, transport trail, buyer evidence, or similar material. Reliance on a general report and theoretical norms, without conducting an experiment at the assessee's own factory and without independent proof of actual excess manufacture and removal, was held to be insufficient. The demand could not rest on assumptions, probabilities, or arbitrary selection of one consumption norm from among several divergent reports.

Conclusion: The finding of clandestine removal based mainly on electricity consumption pattern was not sustainable.

Issue (ii): Whether the adjudication was vitiated for violation of natural justice and non-consideration of the main defence and relied-upon material.

Analysis: The adjudicating authority was required to deal with the principal objections raised by the assessee and to give reasons for rejecting them. The relied-upon documents, including reports referred to in the notice, were not shown to have been properly supplied or effectively considered. An order that fails to apply its mind to the main defence and does not disclose reasons for disagreement with the assessee's case violates the minimum requirements of natural justice and is liable to be interfered with in writ jurisdiction.

Conclusion: The adjudication was vitiated by breach of natural justice.

Final Conclusion: The impugned adjudication was quashed and the matter was sent back for fresh decision in accordance with law, with emphasis on independent evidence and proper adherence to natural justice.

Ratio Decidendi: Allegations of clandestine removal in excise matters cannot be sustained on electricity consumption pattern alone; they require positive corroborative evidence, and an unreasoned adjudication that ignores the principal defence and relied-upon material is vitiated for breach of natural justice.

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