Clandestine removal demand fails where private slips and untested statements lack corroboration and cross-examination.

Allegations of clandestine manufacture and clearance of sandals failed because the Revenue relied mainly on private stock slips, witness statements and record discrepancies without proving excess raw material, unaccounted removals or sale proceeds. The slips were found to reflect incomplete, projected and work-in-progress quantities in a job-work arrangement for a sole buyer. Denial of cross-examination also reduced the evidentiary value of the statements relied upon. In clandestine removal matters, the burden remains on the Revenue to establish the charge through tangible, corroborative evidence; on these facts, the demand and penalty were unsustainable and the assessee obtained relief.

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Issues: Whether the demand of duty and penalty for alleged clandestine manufacture and clearance of sandals could be sustained on the basis of private stock slips, statements of witnesses and discrepancy in records, and whether denial of cross-examination and absence of corroborative evidence vitiated the proceedings.

Analysis: The slips relied upon by the Revenue were found to include incomplete and projected production, and the activity was in the nature of job work for a sole buyer under a branded arrangement. No excess raw material, no proven unaccounted removals, and no independent evidence of clandestine clearance or sale proceeds were established. The witness whose statement explained the stock reports indicated that the reports also contained work-in-progress and projected quantities. The denial of cross-examination further impaired the evidentiary value of the relied upon statements. In a case alleging clandestine removal, the burden remains on the Revenue to establish the charge by tangible and corroborative evidence.

Conclusion: The demand, penalty and consequential confirmation were unsustainable and the impugned order was set aside in favour of the assessee.

Ratio Decidendi: A demand of clandestine removal cannot be sustained on private papers and untested statements alone unless supported by tangible, corroborative evidence and a fair opportunity of cross-examination is afforded where relied upon statements are used.

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