Clandestine removal demands need corroboration; unverified mismatch between private records and returns cannot sustain excise duty.

Excise duty could not be sustained on a mere discrepancy between an assessee's internal operational report and ER-1 returns where no independent evidence of clandestine removal was produced. A private management record prepared for accounting purposes, without corroboration, was insufficient to establish suppressed clearance. The demand also failed because the department had not first established the assessee's capacity to manufacture the alleged differential quantity. The Tribunal held that clandestine removal must rest on corroborative evidence and a proper factual foundation for production and removal, and the impugned demand was set aside.

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Issues: Whether excise duty demand could be sustained solely on the basis of discrepancy between the appellant's annual operational statistical report and ER-1 returns, without independent evidence of clandestine removal or proof of capacity to manufacture the alleged differential quantity.

Analysis: The demand was founded only on the difference between the quantities reflected in the appellant's internal statistical report and the ER-1 returns. No separate evidence of removal from the factory was produced. The record showed that a substantial part of the molten slag was sold to a separate entity situated in the same for conversion into granulated slag, and that such clearances were covered by duty payment by the recipient. The demand was also raised without first ascertaining whether the appellant had the manufacturing capacity to produce the alleged additional quantity. A private or internal management document, prepared for accounting and information purposes, could not by itself establish clandestine clearance in the absence of corroboration.

Conclusion: The demand was unsustainable and the impugned order was liable to be set aside.

Final Conclusion: Excise duty could not be confirmed on the basis of an uncorroborated discrepancy in private records, and the appellant was entitled to relief.

Ratio Decidendi: A duty demand for alleged clandestine removal cannot rest only on a discrepancy between internal records and statutory returns unless it is supported by independent corroborative evidence and a proper factual basis for production and removal is established.

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