Clandestine removal and SSI clubbing upheld on admissions and common manufacturing setup, but confiscation failed without seizure.

Admissions reflected in computer printouts, corroborated by investigation and the absence of separate production, raw material and clearance records, were sufficient to sustain a finding of clandestine removal. The two units were also correctly clubbed for SSI exemption because they operated from the same premises, shared electricity, had no separate machinery and manufactured identical goods, showing a common manufacturing setup. However, confiscation and the related penalty could not be sustained where the alleged goods were not seized, so that component was set aside while the duty demand and clubbing were maintained.

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Issues: (i) Whether the clearances could be treated as clandestine on the basis of computer printouts and statements; (ii) whether the clearances of the two units could be clubbed for the purpose of SSI exemption; (iii) whether confiscation and the related penalty could be sustained when the goods were not seized.

Issue (i): Whether the clearances could be treated as clandestine on the basis of computer printouts and statements.

Analysis: The entries reflected in the computer printouts were found in the presence of the concerned persons and were admitted to have been made on their directions. The units had maintained no separate records of production, raw materials, or clearances, and the printed figures were corroborated by investigation at a major customer. In these circumstances, the absence of physical records did not dislodge the revenue's case.

Conclusion: The finding of clandestine clearances was upheld.

Issue (ii): Whether the clearances of the two units could be clubbed for the purpose of SSI exemption.

Analysis: The two concerns functioned from the same premises, shared electricity, had no separate machinery or equipment, and manufactured identical goods. The facts showed that they were effectively operating as one factory for the purpose of determining the eligibility threshold under the SSI exemption scheme. The retraction of one inculpatory statement did not alter the objective circumstances establishing a common manufacturing setup.

Conclusion: The clubbing of clearances was justified.

Issue (iii): Whether confiscation and the related penalty could be sustained when the goods were not seized.

Analysis: The goods alleged to have been removed clandestinely were not seized by the department. In the absence of seizure of the very goods said to be liable to confiscation, confiscation could not be ordered, and the penalty founded on that basis could not survive.

Conclusion: The confiscation and the associated penalty were set aside.

Final Conclusion: The duty demand and clubbing of clearances were sustained, but the confiscation-based penalty was deleted, resulting in a partial allowance of the appeals.

Ratio Decidendi: Admissions, corroborated computer records, and surrounding circumstances can establish clandestine removal and justify clubbing of clearances for SSI exemption where the units function as one manufacturing establishment, but confiscation cannot be sustained for goods not seized.

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