Clandestine removal demands need positive proof; electricity consumption and suspicion alone cannot sustain excise liability.

A demand for central excise duty based on projected production from electricity consumption and other circumstantial indicators of alleged clandestine manufacture of MS ingots was held unsustainable. Electricity-based quantification, even with technical opinion and supporting allegations such as shortage of moulds, bogus slag sales and false trading entries, was treated as insufficient on its own to prove clandestine removal. The stated principle is that excess electricity consumption may create suspicion, but the Revenue must still establish clandestine manufacture and clearance with tangible, positive and concrete evidence. On that basis, the demand failed and the appeal was allowed in favour of the assessee.

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Issues: Whether the demand of central excise duty could be sustained on the basis of projected production worked out from electricity consumption and allied circumstantial evidence to allege clandestine manufacture and removal of MS ingots.

Analysis: The demand had been founded primarily on estimated electricity consumption per metric tonne of MS ingots, supported by a technical opinion. The Revenue also relied on shortage of moulds, alleged bogus slag sales and alleged false commodity trading entries. The appellants disputed the reliability of electricity-based quantification and contended that clandestine removal cannot be presumed without tangible evidence. The cited precedent held that electricity consumption alone is not a safe basis for confirming clandestine removal and that the Revenue must discharge its burden by positive and concrete evidence. Excess electricity consumption may create suspicion, but suspicion cannot replace proof. The additional circumstances relied upon by the Revenue were found insufficient, by themselves, to establish clandestine manufacture and clearance.

Conclusion: The demand was not sustainable and the appeal was allowed in favour of the assessee.

Ratio Decidendi: A demand for clandestine manufacture and removal cannot be upheld merely on estimated electricity consumption or other suspicious circumstances unless supported by tangible, positive and concrete evidence.

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