Clandestine removal demands need corroboration: unverified ledger entries, loose transport records, and doubtful stock checks were insufficient.

A demand for alleged clandestine removal cannot rest on wrongly aggregated ledger entries, preliminary transporter booking memoranda, loose GRs, or doubtful stock verification without corroboration. The seized ledger reflected separate debit and credit entries, so treating both as excess royalty payment inflated the figure and did not prove extra consideration; that component was set aside, with only limited reverification of the arithmetical mistake. Transport records and loose GRs were insufficient to prove clandestine clearance, and the chemist's diary entries, unverified stock-taking, confiscation of goods and currency, and penalties could not survive once the foundational demand failed.

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Issues: (i) Whether the duty demand based on alleged excess royalty reflected in the seized ledger could be sustained; (ii) Whether the demand founded on transporter booking registers and loose GRs proved clandestine clearance; (iii) Whether the findings based on physical stock verification, diary entries of the chemist, confiscation of goods and currency, and penalties could stand.

Issue (i): Whether the duty demand based on alleged excess royalty reflected in the seized ledger could be sustained.

Analysis: The disputed ledger contained separate debit and credit columns, but the Revenue added both sides together and treated the resulting figure as excess royalty payment. Such merging of distinct accounting entries inflated the amount and did not establish receipt of extra consideration or clandestine removals. The absence of any supporting statement from the concerned supplier further weakened the basis of the demand.

Conclusion: The demand based on royalty entries was unsustainable; the matter was set aside and remanded only for reverification of the arithmetical mistake.

Issue (ii): Whether the demand founded on transporter booking registers and loose GRs proved clandestine clearance.

Analysis: The booking registers were only preliminary booking memoranda reflecting approximate vehicle requirements and not conclusive records of actual transport. The cross-examination of the transporter supported this position. Loose GRs and third-party transport records, without corroborative evidence, were insufficient to prove clandestine removal.

Conclusion: The demand based on booking registers and loose GRs was not sustainable.

Issue (iii): Whether the findings based on physical stock verification, diary entries of the chemist, confiscation of goods and currency, and penalties could stand.

Analysis: The stock-taking exercise was successfully challenged immediately after search, and the panch witness did not support the alleged physical verification. The quantity involved was too large to have been verified in the claimed time. The chemist's diary entries were treated as theoretical inputs and could not, without corroboration, support a finding of clandestine manufacture. Once the core duty demands failed, the confiscation of goods and currency and the connected penalties could not survive.

Conclusion: These findings were set aside, along with the confiscation and penalties.

Final Conclusion: The assessee obtained substantial relief: the principal demands based on alleged clandestine clearance were set aside, one component was remanded only for limited reverification, and the confiscation and penalty consequences were deleted.

Ratio Decidendi: A demand of clandestine manufacture or removal cannot be sustained on the basis of uncorroborated or wrongly aggregated entries, preliminary transporter records, or doubtful stock verification, and confiscation or penalties cannot survive when the foundational demand fails.

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