Clandestine removal demands need corroboration and tested witness evidence; unexamined statements alone cannot sustain duty demand.

Statements recorded during investigation could not be treated as the sole basis for demand unless the witness was examined before the adjudicating authority and the assessee was given a fair opportunity for cross-examination; on that footing, reliance on untested statements was unsustainable. Allegations of clandestine removal and undervaluation also failed because the record lacked independent corroboration such as excess raw material, higher power consumption, identified buyers, transport proof, or proof of sale proceeds. The demand and related penalties were therefore largely set aside, with only the limited consequence arising from admitted delayed duty payment being retained.

---

---

Issues: (i) Whether the statements recorded during investigation could be relied upon without compliance with the procedure governing examination of witnesses and opportunity of cross-examination. (ii) Whether clandestine removal and undervaluation of excisable goods were proved on the basis of the material on record.

Issue (i): Whether the statements recorded during investigation could be relied upon without compliance with the procedure governing examination of witnesses and opportunity of cross-examination.

Analysis: The evidentiary basis of the demand rested substantially on statements recorded under the departmental summons procedure. Where the adjudicating authority proposes to rely on such statements, the witness must be brought before the authority for examination and the assessee must be afforded an opportunity to test that evidence. Mere issuance of summons, without ensuring effective examination and cross-examination, is insufficient. In the absence of compliance with the statutory safeguards and the requirements of natural justice, such statements could not safely be treated as the sole basis for sustaining the demand.

Conclusion: The reliance placed on the statements without proper compliance was not sustainable and was held against the Revenue.

Issue (ii): Whether clandestine removal and undervaluation of excisable goods were proved on the basis of the material on record.

Analysis: The allegations of clandestine manufacture and clearance were not supported by independent corroboration such as evidence of excess raw materials, excess power consumption, identified buyers, proof of transport, or receipt of sale proceeds. The material relied upon was found insufficient to establish actual clandestine removal. The record also did not justify sustaining the broader demand on the alleged basis of undervaluation. However, the Tribunal sustained the limited consequence flowing from admitted late payment of duty and interfered with the rest of the demand and penalties.

Conclusion: The allegations of clandestine removal and the consequential demands were not proved, except for the limited relief relating to late payment consequences, which was sustained.

Final Conclusion: The appeal succeeded substantially, with the impugned order set aside in the main, while only a limited penalty and interest direction relating to admitted delayed duty payment was retained.

Ratio Decidendi: A demand for clandestine removal cannot be sustained on uncorroborated statements alone, and statements relied upon in adjudication must be proved in accordance with the statutory procedure and principles of natural justice.

---