Clandestine removal and SSI exemption cannot be denied without corroborative evidence or proof of collusion in brand-owner ineligibility.

Clandestine removal demands cannot be sustained on a Sales Manager Report alone; corroborative evidence such as unaccounted raw material consumption, excess power use, or unexplained sale proceeds is required, and the demand here was set aside. SSI exemption is goods-specific, so clearance of Bisleri Club Soda could not be denied merely because the brand owner did not itself manufacture the goods, and that denial was set aside. SSI exemption for Citra clearances also could not be refused solely on an alleged brand-owner turnover breach where departmental certificates existed and there was no proof of collusion, knowledge, or connivance; that demand was likewise set aside.

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Issues: (i) whether the demand based on alleged clandestine removal could be sustained on the strength of the Sales Manager Report without corroborative evidence; (ii) whether SSI exemption could be denied in respect of goods cleared under the brand name Bisleri Club Soda on the premise that the brand owner did not itself manufacture the goods; (iii) whether SSI exemption could be denied for Citra clearances on the allegation that the brand owner had exceeded the aggregate value of clearances and the assessee was therefore ineligible for exemption.

Issue (i): whether the demand based on alleged clandestine removal could be sustained on the strength of the Sales Manager Report without corroborative evidence

Analysis: The demand rested on the comparison between sales figures in the Sales Manager Report and the figures entered in the RG-1 register. The Tribunal held that such a demand could not stand on that material alone, because clandestine manufacture and removal require corroborative evidence such as proof of procurement and use of additional raw materials, higher power consumption, or receipt of unaccounted sale proceeds. The earlier decision in the identical franchisee dispute was treated as governing the issue.

Conclusion: The demand of duty on this issue was unsustainable and was set aside in favour of the assessee.

Issue (ii): whether SSI exemption could be denied in respect of goods cleared under the brand name Bisleri Club Soda on the premise that the brand owner did not itself manufacture the goods

Analysis: The Tribunal applied the principle that the relevant question under the exemption notification is whether the manufacturer clearing the specified goods is eligible for exemption in respect of those goods. It held that the exemption is goods-specific and that non-manufacture by the brand owner, by itself, does not defeat the franchisee's entitlement where the factual setting is materially the same as the one considered by the Supreme Court in the cited precedent.

Conclusion: Denial of SSI exemption on this ground was held to be unsustainable and was set aside in favour of the assessee.

Issue (iii): whether SSI exemption could be denied for Citra clearances on the allegation that the brand owner had exceeded the aggregate value of clearances and the assessee was therefore ineligible for exemption

Analysis: The Tribunal found that the assessee had relied on certificates issued by the jurisdictional Central Excise officers stating that the brand owner was availing exemption, and there was no material to show that the assessee had colluded with the brand owner or misrepresented the facts to the department. In the absence of knowledge or connivance, and in view of the departmental certificates, the benefit of SSI exemption could not be denied merely because the brand owner was later alleged to have crossed the turnover threshold under the notifications.

Conclusion: The demand on this issue was unsustainable and was set aside in favour of the assessee.

Final Conclusion: All the disputed demands and consequential penalties failed, and the appeals were allowed with the impugned orders set aside.

Ratio Decidendi: A demand of clandestine removal cannot be sustained without corroborative evidence, and SSI exemption under goods-specific notifications cannot be denied to a franchisee absent specific allegations and material showing knowledge, collusion, or connivance in the brand owner's ineligibility.

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