Natural justice and corroboration in clandestine removal cases require disclosure, cross-examination, and tangible evidence beyond electricity use.

Reliance on third-party statements and seized documents requires disclosure of the relied-upon material and, where requested and relevant, an opportunity for cross-examination; refusal must be reasoned. Clandestine removal cannot be sustained on electricity consumption alone and must be supported by tangible corroborative evidence such as raw material procurement, production, dispatch, or sale records. Because the dispute also involved search material, the matter was remanded for fresh adjudication for the specified period, with directions to supply documents, permit cross-examination if statements are relied upon, and decide by a reasoned order.

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Issues: (i) whether opportunity of cross-examination was required before reliance on third-party statements and seized documents, (ii) whether alleged clandestine removal could be sustained merely on electricity consumption, and (iii) whether the matter required remand for reconsideration on the basis of search material and the specified period.

Issue (i): whether opportunity of cross-examination was required before reliance on third-party statements and seized documents.

Analysis: The decision reiterates that when the adjudicating authority proposes to rely upon statements of persons or other inculpatory material, the affected party must be supplied the relied-upon documents and, where requested and relevant, afforded cross-examination. The requirement flows from the statutory scheme governing evidentiary statements and from the rules of fair hearing. The authority must also record reasons if cross-examination is declined.

Conclusion: The requirement of supplying relied-upon material and permitting cross-examination, where sought and necessary, was held to be mandatory.

Issue (ii): whether alleged clandestine removal could be sustained merely on electricity consumption.

Analysis: The Court applied the settled principle that clandestine removal is a serious allegation and cannot rest on assumptions, surmises, or electricity consumption by itself. Such a charge must be supported by tangible and corroborative evidence, including material showing procurement of raw material, production, dispatch, sale, or other surrounding circumstances. In the absence of such supporting material, a demand founded only on electricity consumption cannot stand.

Conclusion: The finding based on electricity consumption alone was set aside and answered in favour of the assessee.

Issue (iii): whether the matter required remand for reconsideration on the basis of search material and the specified period.

Analysis: Since the dispute was not confined to electricity consumption and also involved documents recovered during search, the Court held that the original authority should reconsider the demand on the basis of the available search records and only for the periods indicated. The authority was directed to supply documents, permit cross-examination if relied upon statements were used, and decide the matter afresh by a reasoned order.

Conclusion: The impugned orders were quashed to the extent indicated and the matter was remanded for fresh adjudication within the specified period.

Final Conclusion: The assessee obtained relief on the electricity-based demand, while the remaining controversy was sent back for fresh decision on the strength of the search material and with observance of natural justice.

Ratio Decidendi: A demand of clandestine removal cannot be sustained on electricity consumption alone and must rest on corroborative tangible evidence, while any relied-upon statements must be disclosed with fair opportunity of cross-examination.

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