Clandestine removal demands need corroborative evidence; third-party entries and statements alone could not support duty and penalties.

CESTAT held that an allegation of clandestine removal cannot be sustained merely on third-party records or a statement recorded during investigation unless there is corroborative evidence directly linking the assessee to the alleged clearances. In the absence of any incriminating material recovered from the appellants and with the appellants denying the business transactions during the relevant period, the demand was treated as resting only on presumption and guesswork. The duty demand and consequential penalties were therefore set aside, and the appellants obtained complete relief.

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Issues: Whether the allegation of clandestine removal of finished goods was proved on the basis of third-party records and a statement recorded during investigation, and whether the duty demand and penalties were sustainable.

Analysis: The allegation rested on inference drawn from the books and statement of a third party, without any incriminating material recovered from the appellants. There was no corroborative evidence linking the appellants to the alleged removals, and the appellants had categorically denied business transactions during the relevant period. A demand founded only on presumption and guesswork could not be sustained in such circumstances.

Conclusion: The allegation was held to be unsubstantiated, and the demand of duty and the penalties were set aside.

Final Conclusion: The appeals succeeded and the appellants obtained complete relief against the confirmed demand and consequential penalties.

Ratio Decidendi: A duty demand for clandestine removal cannot be sustained merely on third-party entries or statements unless supported by corroborative evidence directly linking the assessee to the alleged clearances.

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