Clandestine Removal Must Be Proved by Corroborative Evidence; Demand Based Only on Third-Party Papers Was Set Aside
Allegations of clandestine removal require cogent corroborative evidence showing additional manufacture and clearance beyond statutory records. Where the demand rested only on card summary sheets and other third-party papers, without reconciliation with the assessee's books or proof of raw material procurement, electricity use, labour deployment, transport, or receipt of sale proceeds, the confirmation of duty and penalties was treated as presumptive. The Tribunal held that such uncorroborated material was insufficient to sustain central excise demand and penalties, and the impugned order was set aside in favour of the assessee and co-appellants.
Issues: Whether the demand of central excise duty and penalties for alleged clandestine removal were sustainable when the allegation rested on card summary sheets and third-party records without corroboration from statutory records and independent evidence.
Analysis: The demand was based on retail card summary sheets and other third-party material, but the record did not establish that the alleged clearances were in addition to the clearances already reflected in the assessee's statutory records. The Tribunal found that the Revenue did not reconcile the alleged quantity with the statutory record or with the books maintained in the ordinary course of business. It further noted the absence of evidence regarding procurement of raw materials, consumption of electricity, labour deployment, transport, receipt of sale proceeds, or any other material to prove manufacture and clearance of the alleged quantity. On these facts, the show cause notice and the confirmation of duty and penalties were treated as presumptive.
Conclusion: The demand and penalties were unsustainable and were set aside in favour of the assessee and the co-appellants.
Final Conclusion: The appeals succeeded, the impugned order was set aside, and consequential relief followed according to law.
Ratio Decidendi: Allegations of clandestine removal must be supported by cogent corroborative evidence showing additional manufacture and clearance beyond statutory records; a demand founded only on presumptions or third-party papers is unsustainable.
TaxTMI 
AI Drafter ✕
TaxTMI 
