Clandestine removal claims need corroborative evidence; rough slips and electricity use alone cannot justify duty demand or credit denial.

Clandestine removal cannot be sustained on mere suspicion; the Revenue must produce positive, corroborative and cogent evidence linking alleged excess production and clearances to identifiable buyers, transporters or supporting statements. Rough production slips and electricity consumption alone were found insufficient to prove clandestine clearances, so the duty demand and related penalties failed. Raw material shortages, without further proof of removal or diversion, likewise do not justify reversal or denial of Cenvat credit. On that basis, the demand and the credit disallowance were held unsustainable.

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Issues: Whether the demand of duty based on alleged clandestine removal, and the denial of Cenvat credit on the basis of raw material shortages, could be sustained in the absence of cogent corroborative evidence.

Analysis: The Revenue relied mainly on rough production slips and electricity consumption. The slips did not identify any buyer or transporter and were unsupported by statements of the assessee's employees, transporters, or customers. Electricity consumption, by itself, was held insufficient to establish excess production or clandestine clearances. The settled principle applied was that clandestine removal must be proved by positive, corroborative and cogent evidence, and cannot rest on mere presumption. As to raw material shortages, such shortages, without more, do not establish their clearance or justify reversal of Cenvat credit.

Conclusion: The duty demand and related penalties were not sustainable, and the denial of Cenvat credit on shortages of raw materials was also not justified.

Ratio Decidendi: Allegations of clandestine removal and credit reversal must be supported by positive, corroborative evidence; production slips, electricity consumption, or unexplained shortages alone are insufficient to sustain demand or denial of credit.

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