Clandestine removal demands need corroboration; third-party records and pen-drive data alone were insufficient to sustain duty and penalties.

Central excise duty and penalties cannot be sustained merely on third-party records and pen-drive data unless the Department proves clandestine removal with corroborative evidence. Where there is no proof of excess raw material, actual manufacture, identifiable clearances, transport details, sale proceeds, or flow back of funds, and transporters' statements are vague, the allegation remains unproved. In the absence of independent investigation at supplier and customer ends and tangible corroboration, the demand fails and the penalties are set aside.

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Issues: Whether the demand of central excise duty and penalties could be sustained on the basis of third-party records and pen-drive data without corroborative evidence of clandestine removal.

Analysis: The Department relied principally on records and digital data recovered from the premises of a third party to allege clandestine manufacture and removal. The evidence did not establish the essential links ordinarily required in such cases, namely procurement of excess raw material, actual manufacture, identifiable clearances, transportation particulars, receipt of sale consideration, or flow back of funds. The transporters' statements were also found to be vague and did not specifically support removal without duty payment. In the absence of independent investigation at the supplier's and customer's ends and in the absence of tangible corroboration, the allegation remained unproved.

Conclusion: The duty demand and penalties were unsustainable and were set aside.

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