Clandestine removal must be proved by cogent, corroborated evidence; retracted and inconsistent statements were insufficient here.

In a clandestine removal dispute under the Central Excise Act, the court held that the Revenue must prove unaccounted receipt of raw material, unaccounted production and secret clearance by cogent, positive and corroborated evidence. The Tribunal was justified in rejecting statements recorded in inquiry where several were retracted, contained material inconsistencies and were not shown to be voluntary, and in finding that the documents did not reliably prove receipt of goods or link demand drafts to alleged removals. In the absence of supporting evidence such as driver statements, stock discrepancies or other independent corroboration, the demand of duty, confiscation and penalties could not be sustained.

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Issues: Whether the Tribunal was in rejecting evidence recorded in an inquiry under Section 14 of the Central Excise Act, 1944 and in setting aside the demand, confiscation and penalties on the allegation of clandestine removal.

Analysis: The dispute turned on appreciation of oral and documentary evidence, including statements of transporters, suppliers and employees, many of which were retracted and found to contain material discrepancies between earlier and later versions. The Court held that the Revenue had to establish unaccounted receipt of raw material, unaccounted production and clandestine clearance by cogent and positive evidence. It agreed with the Tribunal that the available documents did not contain reliable acknowledgment of receipt, the statements were not shown to be voluntary, the demand drafts could not be properly co-related with the alleged removals, and there was no sufficient corroboration such as driver statements or stock discrepancy at the factory.

Conclusion: The Tribunal was justified in rejecting the Revenue's case on clandestine removal and in declining to sustain the demand of duty, confiscation of goods and imposition of penalties.

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