Clandestine manufacture claims fail when accepted furnace capacity is final and excess production is not proved by contrary evidence.

Clandestine manufacture and clearance of MS ingots could not be sustained where the accepted furnace capacity had already attained finality on earlier appellate findings and no contrary evidence of higher production capacity was produced. The Revenue's reliance on heat registers, private records, electricity consumption, and movement entries was insufficient because those materials did not displace the foundational finding on producible capacity. Once excess production was not established, the connected duty demand and consequential penalties, including those on the sister concern, also failed. The matter therefore turned on the absence of proof that the furnace could have generated the alleged quantity, making the entire demand unsustainable.

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Issues: Whether the demands of duty and penalties were sustainable on the basis of alleged clandestine manufacture and clearance of MS ingots, having regard to the furnace capacity and the evidence on record.

Analysis: The decisive question was whether the assessee's furnace could have produced the quantity alleged by the Revenue. Earlier appellate findings had accepted the furnace capacity at 2.1 MT per heat, based on the manufacturer's invoice and the determination under the capacity rules, and no contrary evidence had been produced in the present round. The later adjudication could not disregard those findings merely by relying on heat registers, private records, electricity consumption, or alleged movement entries, because the foundational premise of excess producible capacity had not been established. Once the alleged excess production itself failed, the connected allegations of clandestine removal and the consequential penalty on the sister concern also could not survive.

Conclusion: The allegation of clandestine manufacture and removal was rejected, and the duty demand as well as the penalties were set aside in favour of the assessee.

Final Conclusion: The appeals succeeded because the Revenue failed to establish production beyond the accepted furnace capacity, and the entire demand and ancillary penalties were unsustainable.

Ratio Decidendi: Where the production capacity of the furnace has attained finality on the evidence and earlier appellate findings, clandestine manufacture and clearance cannot be sustained merely from private records or electricity consumption data without contrary proof of enhanced capacity.

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