Clandestine removal requires reliable corroboration; alleged stock shortage alone cannot sustain duty demand or penalty.

A duty demand and penalty based on alleged shortage of finished goods and inputs were held unsustainable because the shortage was calculated on an average basis without actual weighment, so stock position was not reliably established. A manager's statement that the shortage could not be explained did not, by itself, prove clandestine clearance. In the absence of independent corroboration showing clandestine manufacture, transport, sale, or identification of buyers, the allegation failed. The demand and penalty were set aside for want of proof of clandestine removal, and the assessee succeeded.

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Issues: Whether the duty demand and penalty could be sustained on the basis of alleged shortage of finished goods and inputs, in the absence of corroborative evidence of clandestine removal.

Analysis: The shortage was worked out on an average basis without actual weighment, so the stock position was not reliably established. The statement of the manager merely indicated inability to explain the shortage and did not amount to evidence of clandestine clearance. No independent material was produced to show clandestine manufacture, transportation, sale, or identification of buyers, and the allegation was unsupported by corroboration.

Conclusion: The demand and penalty were not sustainable, and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned demand and penalty were set aside for want of proof of clandestine removal.

Ratio Decidendi: A demand for duty based on alleged shortage cannot be upheld unless clandestine removal is proved by reliable and corroborative evidence.

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