Clandestine removal demands require corroborative evidence; unexplained weight differences, diary entries, and loose sheets alone are insufficient.

Unexplained weight variation between goods carriage receipts and invoices, by itself, was insufficient to sustain a clandestine removal demand where the number of bags and cartons tallied and the buyers' correspondence supported the explanation for packing and promotional material. Alleged duty demands founded on an unproved diary entry and an unsigned loose sheet also failed because there was no author examination, no reliable link to taxable clearances, and no corroborative enquiry. As the ingredients of clandestine removal were not established on independent evidence, the connected penalties under Section 11AC and Rule 52-A could not survive. Only the admitted, uncontested duty component remained undisturbed.

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Issues: (i) Whether the duty demand based on differences in weight between goods carriage receipts and invoices was sustainable; (ii) Whether the duty demand based on diary entries and a loose sheet was sustainable; (iii) Whether the penalties under Section 11AC of the Central Excise Act and Rule 52-A of the Central Excise Rules, 1944 were sustainable.

Issue (i): Whether the duty demand based on differences in weight between goods carriage receipts and invoices was sustainable.

Analysis: The entries showed that the number of bags and cartons in the goods carriage receipts and the invoices tallied, and the variation was only in gross weight. The explanation that the difference represented packing material, advertisement material, and scheme gifts was found to be supported by the buyers' correspondence and by the investigation record. In the absence of corroborative evidence of clandestine clearance, the demand rested only on inference.

Conclusion: The duty demand on this issue was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the duty demand based on diary entries and a loose sheet was sustainable.

Analysis: The diary entry was not proved by examination of its author, and the statement linking it to clandestine removals was promptly retracted. The loose sheet contained only rough calculations without dates, identities, or proof of dutiable clearances, and no enquiry was made to connect the entries with taxable goods or buyers. The material on record did not provide corroboration for a charge of clandestine removal.

Conclusion: The duty demands on the basis of the diary and loose sheet were not sustainable and were set aside in favour of the assessee.

Issue (iii): Whether the penalties under Section 11AC of the Central Excise Act and Rule 52-A of the Central Excise Rules, 1944 were sustainable.

Analysis: The contested demands that survived for consideration were found to be unsupported by evidence of active clandestine removal, and the balance amounts not contested by the assessee were surrendered for want of reconciliation. In these circumstances, the ingredients for penalty were not established. The penalty under Rule 52-A, being linked to the same alleged violation, also could not survive.

Conclusion: The penalties under Section 11AC and Rule 52-A were set aside in favour of the assessee.

Final Conclusion: The appeals succeeded on the contested demands and consequential penalties, while only the admitted and uncontested duty component remained undisturbed.

Ratio Decidendi: A charge of clandestine removal cannot be sustained on presumptive or uncorroborated material such as unexplained weight variation, unproved diary entries, or loose sheets, unless supported by independent enquiry and corroborative evidence.

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