Clandestine removal demands require corroborative evidence; electricity-consumption estimates and disputed financial entries were insufficient here.

Clandestine manufacture and removal cannot be established on electricity-consumption estimates or theoretical norms alone. The Revenue must support such a charge with affirmative, corroborative evidence of excess raw material receipt, actual manufacture, transport, sale, or receipt of sale proceeds; here, the varying electricity norms and lack of factory-specific testing made the demand unsustainable. Alleged share-trading profits and related statements also could not sustain the excise demand or penalties because the entries were treated as recorded income, and no independent proof linked them to clandestine clearances. Denial of cross-examination further weakened the reliance on third-party statements.

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Issues: (i) Whether duty could be confirmed for alleged clandestine manufacture and removal of M.S. ingots solely on the basis of electricity-consumption norms derived from technical opinion and without independent corroborative evidence; (ii) Whether the alleged fictitious share-trading profits and related statements could be used to sustain the excise demand and penalties.

Issue (i): Whether duty could be confirmed for alleged clandestine manufacture and removal of M.S. ingots solely on the basis of electricity-consumption norms derived from technical opinion and without independent corroborative evidence.

Analysis: The electricity norms relied upon by the Department showed wide variation across different reports, and no experiments were conducted in the appellants' factories to fix a reliable norm. The demand was founded on estimation and hypothesis rather than tangible evidence of excess raw material receipt, actual manufacture, transport, sale, or receipt of sale proceeds. In clandestine removal matters, the burden lies on the Revenue to prove the charge through affirmative and corroborative material, and electricity consumption by itself is not enough to establish production or removal. The reliance on a single theoretical norm without studying the actual factory conditions was held to be unsustainable.

Conclusion: The demand based solely on electricity-consumption estimates was not sustainable and is against the Revenue.

Issue (ii): Whether the alleged fictitious share-trading profits and related statements could be used to sustain the excise demand and penalties.

Analysis: The alleged profits from share transactions were treated by the appellants as duly recorded business income and had been assessed by income-tax authorities. The excise authorities could not disregard those records and assume that the amounts represented sale proceeds of clandestinely removed ingots without independent proof. The impugned reliance on statements of brokers and related persons was also weakened by the denial of cross-examination. As the primary basis for alleging clandestine manufacture itself failed, the corroborative use of these financial entries also collapsed.

Conclusion: The alleged share-trading profits could not be used to uphold the excise demand or penalties and this issue is against the Revenue.

Final Conclusion: The duty demands and consequential penalties were set aside because clandestine manufacture and removal were not proved by reliable evidence.

Ratio Decidendi: Allegations of clandestine manufacture and removal cannot be sustained on electricity-consumption estimates or theoretical assumptions alone; the Revenue must prove the charge with tangible, corroborative evidence.

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