Uncorroborated third-party records and electricity estimates cannot, by themselves, sustain clandestine manufacture duty demands.

A clandestine manufacture and removal demand cannot be sustained merely on uncorroborated third-party records showing alleged receipt of MS ingots, where no independent evidence links the assessee to unaccounted use or clearance. Likewise, estimated production based only on electricity consumption of another unit is insufficient unless the two units are shown to be comparable and the estimate is supported by technical verification in the assessee's factory. Electricity consumption may serve only as corroborative material, not the sole basis for quantifying duty demand. On these principles, the demand, penalty, and related findings were set aside.

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Issues: (i) whether demand of duty could be sustained on the basis of alleged unaccounted receipt of MS ingots supported only by records of a third party without corroboration; (ii) whether alleged clandestine production and removal could be inferred solely from electricity consumption adopted from another unit.

Issue (i): whether demand of duty could be sustained on the basis of alleged unaccounted receipt of MS ingots supported only by records of a third party without corroboration.

Analysis: The alleged discrepancy in receipt of raw material was traced to records recovered from another concern, but no independent evidence linked the appellant to unaccounted receipt or use of the material. The material from the third party was not supported by corroborative evidence and cross-examination was not shown to have established the alleged clearance. A demand founded only on such third-party entries could not by itself prove clandestine manufacture or clearance.

Conclusion: The allegation based on alleged unaccounted receipt of MS ingots was not sustainable.

Issue (ii): whether alleged clandestine production and removal could be inferred solely from electricity consumption adopted from another unit.

Analysis: The demand was principally built on estimated production derived from average electricity consumption of a different unit, but the two units were not shown to be comparable in technology, capacity, scale, or operational characteristics. No technical study or actual experiment was conducted in the appellant's factory to ascertain true power consumption or to corroborate excess production. Electricity consumption may be only a corroborative circumstance, but it cannot, without more, be the sole basis for quantifying clandestine manufacture and removal.

Conclusion: The demand based on electricity consumption was not sustainable.

Final Conclusion: The impugned demand, penalty, and related findings were set aside and the appellants succeeded on merits.

Ratio Decidendi: A duty demand for clandestine manufacture or removal cannot rest merely on uncorroborated third-party records or on estimated production drawn from electricity consumption of an allegedly comparable unit, unless supported by independent evidence and a reliable technical basis.

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