Clandestine removal demands need positive corroborative evidence; assumptions alone cannot sustain duty, penalty, confiscation or extended limitation.

CESTAT, Bangalore held that a demand of central excise duty, with penalty and confiscation, for alleged clandestine manufacture and removal of electronic chokes could not stand where the case rested on assumptions from raw-material purchases, bank withdrawals and estimated production. The record lacked positive corroboration such as excess electricity use, parallel invoices, buyer evidence or other material proving clandestine clearances, so the allegation failed. It further held that the extended limitation period was not invokable because the department did not establish suppression of production or clearance with intent to evade duty, despite returns and records being available. The order confirming duty and penalties was set aside, and consequential relief followed.

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Issues: (i) Whether the demand of central excise duty, penalty and confiscation could be sustained on the allegation of clandestine manufacture and removal of electronic chokes and allied goods; (ii) Whether the extended period of limitation was invokable in the absence of suppression or wilful intent to evade duty.

Issue (i): Whether the demand of central excise duty, penalty and confiscation could be sustained on the allegation of clandestine manufacture and removal of electronic chokes and allied goods.

Analysis: The allegation was founded mainly on assumptions drawn from purchases of one raw material, bank withdrawals and estimated production. The record did not show excess purchase of other raw materials, evidence of buyers receiving clandestinely cleared goods, excess electricity consumption, parallel invoices, or other corroborative material establishing clandestine clearance. The earlier proceedings on similar facts had also been dropped, and the subsequent notice rested on the same investigative basis. A finding of clandestine removal requires positive evidence and cannot be sustained on inference alone.

Conclusion: The demand, penalty and confiscation were not sustainable and the finding of clandestine removal failed.

Issue (ii): Whether the extended period of limitation was invokable in the absence of suppression or wilful intent to evade duty.

Analysis: The materials did not establish suppression of production, clearance or relevant facts with intent to evade central excise duty. The assessee had produced returns and other records, and the department had not unearthed evidence showing deliberate concealment. In such circumstances, the longer limitation period could not be applied.

Conclusion: The extended period of limitation was not invokable.

Final Conclusion: The order confirming duty and penalties was set aside and the assessee succeeded with consequential relief.

Ratio Decidendi: Allegations of clandestine removal and invocation of the extended period must rest on positive corroborative evidence of suppression or unlawful clearance, and cannot be sustained on assumptions, estimates, or presumptions.

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