Shortage of goods alone cannot prove clandestine removal; correlated job-work stock cannot be treated as independent offending goods.

Mere shortage of finished goods found during search does not, without corroborative evidence, establish clandestine removal or justify a duty demand; the alleged clearance must be supported by material linking the shortage to actual removal without payment of duty. On the facts, no such additional evidence was shown, so the demand based on Unit No. 1 shortages was unsustainable. Where excess goods found in connected job-work premises corresponded to the same shortage and those units operated as part of the manufacturing chain, confiscation of the goods and related penalties were not justified. The confiscation and penalties on Units No. 2, 3 and 4 were therefore set aside.

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Issues: (i) Whether shortages of finished goods found in Unit No. 1, without further corroboration, were sufficient to sustain a finding of clandestine removal and duty demand; (ii) Whether confiscation of excess goods found in Units No. 2, 3 and 4 and the related penalties were justified where those units were used for job work and the excess corresponded to the shortages at Unit No. 1.

Issue (i): Whether shortages of finished goods found in Unit No. 1, without further corroboration, were sufficient to sustain a finding of clandestine removal and duty demand.

Analysis: Mere shortage of finished goods detected during search is not, by itself, enough to establish clandestine removal. A charge of clandestine clearance requires supporting material showing removal without payment of duty, such as corroborative evidence connecting the shortages with actual clearance. In the present case, no additional evidence was shown to establish that the short-found goods had been cleared clandestinely.

Conclusion: The finding of clandestine removal and the consequent duty demand against Unit No. 1 were unsustainable and were set aside.

Issue (ii): Whether confiscation of excess goods found in Units No. 2, 3 and 4 and the related penalties were justified where those units were used for job work and the excess corresponded to the shortages at Unit No. 1.

Analysis: The excess goods found in the other units were treated by the Revenue as independent contraband stock, though those units were functioning as job-work premises for Unit No. 1 and the quantity found in excess corresponded to the shortages noticed at Unit No. 1. In that situation, confiscation and penalties were not justified, particularly when the goods were part of the same manufacturing chain and the alleged irregularity was only procedural in nature.

Conclusion: The confiscation of goods and the penalties imposed on Units No. 2, 3 and 4 were set aside.

Final Conclusion: The impugned orders were set aside in entirety and the appellants obtained complete relief in all the connected appeals.

Ratio Decidendi: Shortages of goods, without corroborative evidence of actual removal, do not by themselves establish clandestine removal, and goods found in connected job-work premises cannot be confiscated as independent offending goods when they correspond to the same stock shortage.

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