Clandestine removal demands fail when based only on theoretical yield calculations without corroborative evidence of actual manufacture or clearance.

Demand of duty, interest and penalty based only on DSIR norms and input-output calculations was held unsustainable because clandestine manufacture and removal were not supported by corroborative evidence. The record showed no independent experiment, stock discrepancy, seizure of finished goods, or other material proving actual production and clearance without payment of duty. The tribunal applied the settled principle that clandestine removal is a serious allegation and the department must discharge the burden with substantive evidence, not presumptions or theoretical yield estimates. The allegation was therefore not proved and the appeal succeeded for the assessee.

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Issues: Whether the demand of duty, interest and penalty could be sustained on the basis of DSIR norms and input-output calculations in the absence of corroborative evidence of clandestine manufacture and removal.

Analysis: The demand was founded on alleged suppression of production and clandestine clearances, but the record did not show any independent experiment, proper stock discrepancy, seizure of finished goods, or other corroborative material to establish actual manufacture and removal without payment of duty. The input-output norms drawn from the DSIR report were not treated as sufficient by themselves to quantify production and duty liability. The settled principle applied was that clandestine removal is a serious allegation and the burden lies on the department, which cannot be discharged merely on presumptions, assumptions, or theoretical yield calculations.

Conclusion: The allegation of clandestine manufacture and removal was not proved, and the confirmation of duty, interest and penalty was unsustainable. The appeal was allowed in favour of the assessee.

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