Clandestine removal requires clear evidence; speculative calculations and uncorroborated records cannot justify duty demand or confiscation.

Clandestine removal allegations cannot be sustained on private records, challan books, statements or theoretical production estimates unless the department proves the quantity, nature and value of clearances with clear, reliable and cogent evidence. Here, the material was found speculative, the alleged turnover of both units remained below the SSI threshold, and the demand raised by clubbing clearances for exemption purposes failed. On the same footing, cash and seized goods could not be confiscated because the cash was not linked to clandestine sales and the underlying allegation of unlawful manufacture and clearance was not established. Relief granted to the assessee was therefore upheld.

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Issues: (i) whether the allegations of clandestine manufacture and clearance of moulds, and the resulting demand of duty by clubbing the clearances of the two units for SSI exemption purposes, were sustainable; (ii) whether confiscation of the cash and seized goods was justified.

Issue (i): whether the allegations of clandestine manufacture and clearance of moulds, and the resulting demand of duty by clubbing the clearances of the two units for SSI exemption purposes, were sustainable.

Analysis: The demand was founded on private records, challan books, statements and theoretical calculations of production and value. The evidence did not establish with certainty the quantity, description, nature, size, quality or value of the alleged clearances. The calculations based on average cost and projected production were found to be speculative, and the material relied upon was insufficient to conclusively prove clandestine manufacture or clearance. The turnover of the two units, even when considered together, was found to be below the SSI threshold.

Conclusion: The demand based on alleged clandestine clearance and clubbing of turnover for SSI exemption purposes was not sustainable.

Issue (ii): whether confiscation of the cash and seized goods was justified.

Analysis: The cash was not linked by evidence to sale proceeds of clandestinely removed goods, and an explanation was available for its possession. Since the foundation of clandestine manufacture and clearance itself was not established, the confiscation of the cash and finished goods could not be upheld.

Conclusion: The confiscation of the cash and seized goods was not sustainable.

Final Conclusion: The Revenue failed to prove the alleged clandestine removal with reliable evidence, and the appellate order granting relief to the respondents was sustained.

Ratio Decidendi: A demand for clandestine removal and allied confiscation cannot rest on assumptions, theoretical calculations or uncorroborated records; it must be supported by clear, reliable and cogent evidence establishing the alleged production and clearance.

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