Clandestine removal and extended limitation upheld where seized records, parallel invoices, and corroborative statements proved wilful evasion.

Clandestine removal was proved through seized records, physical stock discrepancies, unaccounted purchases and clearances, repeated use of invoice numbers, and corroborative employee and management statements; the finding of the Commissioner (Appeals) was set aside and duty demand was restored. The limitation objection also failed because the evidence established fraud, suppression and wilful evasion, justifying invocation of the extended period from the date of discovery. On that basis, the appellate relief granted to the respondent was reversed, with consequential penalty and interest revived.

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Issues: (i) Whether the evidence established clandestine removal of inputs and finished goods through parallel invoices and unaccounted clearances. (ii) Whether the demand was barred by limitation and the order of the Commissioner (Appeals) could be sustained on that ground.

Issue (i): Whether the evidence established clandestine removal of inputs and finished goods through parallel invoices and unaccounted clearances.

Analysis: The seized records, physical stock discrepancy, unaccounted purchases and clearances, and the statements of the concerned employees and managing director were taken together as corroborative evidence. The use of the same invoice numbers more than once, preparation of invoices for adjustment, absence of accounting in the statutory records, and the admission regarding clearance without duty payment were treated as establishing clandestine removal. The shortage of inputs and finished goods, along with the misuse of Cenvat credit on inputs cleared without reversal, supported the departmental case.

Conclusion: The allegation of clandestine removal was held to be proved, and the finding of the Commissioner (Appeals) was set aside.

Issue (ii): Whether the demand was barred by limitation and the order of the Commissioner (Appeals) could be sustained on that ground.

Analysis: The period of limitation was held not to defeat the demand because the evidence pointed to fraud, suppression, and wilful evasion detected on investigation. Reliance was placed on the legal position that once such evasion is established, the extended period can be invoked from the date of discovery of the fraud or suppression. The earlier view treating part of the demand as time barred was therefore rejected.

Conclusion: The demand was held to be within the permissible extended period, and the limitation plea failed.

Final Conclusion: The departmental appeal succeeded, the appellate relief granted to the respondent was reversed, and the duty demand with consequential penalty and interest was restored.

Ratio Decidendi: Clandestine removal proved by seized documents, parallel invoices, unaccounted clearances, and corroborative statements justifies duty demand and permits invocation of the extended period where fraud or suppression is established.

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