Clandestine removal not established where rejected biscuits were destroyed with prior intimation and no evidence of secret diversion.

Alleged destruction of rejected biscuits was not treated as clandestine removal where the assessee had given prior intimation to Revenue, the goods were destroyed after about two weeks in the presence of the buyer's representative, and the record showed no material of secret removal or attempted diversion. The Tribunal held that a show cause notice resting on presumption could not sustain duty demand or penalty. On these facts, the allegation of clandestine removal failed and the demand and penalty were unsustainable in favour of the assessee.

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Issues: Whether the alleged destruction of rejected biscuits amounted to clandestine removal so as to justify confirmation of duty demand and penalty.

Analysis: The appellant's case was that rejects and process loss are normal in the biscuit industry, that prior intimation of destruction had been given to the Revenue, that the goods were destroyed after about two weeks in the presence of the buyer's representative, and that there was no evidence of any clandestine activity or attempted removal. The Tribunal found that the show cause notice was founded on presumption and that the record did not disclose material to support clandestine removal. On these facts, the demand and penalty could not be sustained.

Conclusion: The allegation of clandestine removal was not established and the demand and penalty were unsustainable; the appeal was allowed in favour of the assessee.

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