Clandestine removal allegations fail when private records lack corroboration and statements are not tested by cross-examination.

Allegations of clandestine manufacture, duty evasion and wrongful Cenvat credit cannot rest on private records and untested statements unless the records are proved reliable, maintained in the ordinary course of business, and supported by corroboration. Where the persons whose statements are relied upon are not produced for cross-examination, the evidentiary basis is weakened and the statutory requirements for relying on such statements are not met. On these facts, the article notes that the extended period of limitation was also not available, and that the demand, credit denial and penalties were unsustainable.

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Issues: Whether the demands of duty and denial of Cenvat credit based on private records and statements were sustainable, and whether the extended period of limitation could be invoked.

Analysis: The demand rested substantially on private records said to have been recovered from an adjacent wheat field and a rented room, along with statements of certain persons. The Tribunal found that the recovery process and the surrounding circumstances made the documents unreliable, that the alleged records were not proved to have been maintained in the ordinary course of business, and that the persons whose statements were relied upon were not made available for cross-examination. The Tribunal also held that the allegation of clandestine manufacture and removal lacked corroboration and that the material on record did not establish any clear benefit or credible evidentiary chain supporting the Revenue's case. In these circumstances, the Tribunal further held that the extended period was not invokable and that the adjudication suffered from non-compliance with the statutory requirement corresponding to section 9D.

Conclusion: The demand, denial of credit, and penalties were held unsustainable, and the appeals were allowed.

Ratio Decidendi: Allegations of clandestine removal and wrongful credit cannot be sustained on uncorroborated private records and untested statements, particularly where cross-examination is denied and the statutory requirements governing reliance on such statements are not satisfied.

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