Clandestine removal demands require tangible corroboration; unverified stock shortages and private records were insufficient here.

Allegations of clandestine manufacture and removal of copper ingots failed because the supposed stock shortage rested on visual estimation rather than proper weighment, and the private notebooks, diaries and retracted statements were not corroborated by evidence of buyers, transport, electricity use, raw material procurement or actual removals. On that basis, the duty demand was set aside. The related confiscation of seized currency and penalty also fell once the substantive allegation failed. The Revenue's attempt to restore the dropped demand on copper wire rods was rejected because there was no evidence of installed rolling capacity or of outsourcing through outside facilities or hired labour.

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Issues: (i) Whether the demand of central excise duty for alleged clandestine manufacture and removal of copper ingots and allied goods was sustainable on the basis of stock shortage, private records and statements; (ii) whether confiscation of seized currency and penalty could survive if the demand itself failed; and (iii) whether the Revenue was justified in seeking restoration of the duty demand dropped on alleged clearance of copper wire rods.

Issue (i): Whether the demand of central excise duty for alleged clandestine manufacture and removal of copper ingots and allied goods was sustainable on the basis of stock shortage, private records and statements.

Analysis: The alleged shortage of raw material was based on visual estimation and the record did not establish proper physical weighment. A mere shortage of scrap could not, by itself, be converted into proof of unaccounted manufacture and clearance. The private notebooks and diaries relied upon by the department were not shown to be reliable evidence of the assessee's production, particularly when the persons maintaining them were not proved to be employees of the assessee and the capacity of the furnace made the alleged production pattern doubtful. The statements relied upon were also retracted, and there was no sufficient corroboration by evidence of buyers, transport, electricity consumption, procurement of raw material, or actual removal of finished goods.

Conclusion: The demand for clandestine clearance was not sustainable and was set aside.

Issue (ii): Whether confiscation of seized currency and penalty could survive if the demand itself failed.

Analysis: The confiscation of currency and the penalty were founded on the same allegation of unaccounted clearances. Once the substantive allegation of clandestine manufacture and removal failed for want of reliable evidence, the ancillary confiscation and penal consequences could not stand independently.

Conclusion: The confiscation and penalty were set aside.

Issue (iii): Whether the Revenue was justified in seeking restoration of the duty demand dropped on alleged clearance of copper wire rods.

Analysis: The finding dropping the demand for copper wire rods was supported by the physical verification showing that no rolling mill or similar facility was installed in the factory. No material was brought to show that the assessee had got the wire rods manufactured through outside facilities or hired labour. In the absence of evidence establishing capability or actual outsourcing of such manufacture, the dropped demand could not be revived.

Conclusion: The Revenue's appeal on this issue failed.

Final Conclusion: The assessee succeeded in overturning the duty demand, confiscation and penalty, and the Revenue's challenge to the dropped wire-rod demand was rejected.

Ratio Decidendi: Allegations of clandestine manufacture and removal must be supported by tangible and corroborative evidence of production, removal, buyers, transportation or revenue flow, and cannot rest on estimation, unverified private records or unsupported inferences.

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