Clandestine clearance allegations failed where cross-examination was denied and valuation objections were left unanswered, requiring fresh adjudication.

Allegations of clandestine clearance based on private records and statements could not be sustained where the adjudicating authority denied cross-examination and failed to address the assessee's explanations, valuation objections, and supporting material. The record showed explanations for several entries in the kucchi slips and outward despatch registers, including replacement clearances and dispatches of empty corrugated boxes and plastic folders, but these were not examined. The authority also did not consider that the outward registers were recovered from a common compound serving two factories, or the chartered accountant's certificate and average price data. The matter was remanded for de novo adjudication after granting cross-examination and considering the assessee's material and objections.

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Issues: Whether the demand based on alleged clandestine clearance, founded on private records and statements, could be sustained when the adjudicating authority denied cross-examination and did not deal with the assessee's explanations and valuation objections.

Analysis: The recovery of kucchi slips and outward despatch registers was relied upon to allege clandestine removal, but the subsequent statements offered explanations for several entries, including replacement clearances and dispatches of empty corrugated boxes and plastic folders. The adjudicating authority did not record findings on these explanations or on the fact that the outward registers were recovered from a common compound serving two factories. The quantification also proceeded on the assumption that the entire clearances were of the costliest variety, without dealing with the chartered accountant's certificate and average price data produced by the assessee. The request to cross-examine witnesses whose statements were relied upon was also denied, which affected the fairness of the proceedings.

Conclusion: The impugned order could not be sustained and the matter had to be remanded for de novo adjudication after granting cross-examination and considering the assessee's material and objections.

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