Clandine removal requires corroborative evidence; private records and retracted statements alone cannot sustain excise demand or penalties.

Allegations of clandestine removal under central excise law must be supported by positive corroborative evidence; private notebook entries, loose slips and retracted statements alone are insufficient, so the duty demand based on such material could not be sustained. Goods found at dealers' premises are treated as duty paid unless the Revenue proves clandestine clearance, and because the foundational allegation failed, the related demand, confiscation and penalties were set aside. Marginal shortages and excesses in the assessee's premises, without independent proof of suppression or removal, did not justify duty demand or confiscation and were also set aside.

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Issues: (i) Whether the demand of excise duty based on entries in a spiral notebook and loose slips, along with retracted statements, could sustain an allegation of clandestine removal; (ii) Whether duty demand, confiscation and penalties in respect of goods found at dealers' premises could be upheld in the absence of evidence of clandestine clearance; (iii) Whether shortages and excesses found in the assessee's premises justified duty demand or confiscation.

Issue (i): Whether the demand of excise duty based on entries in a spiral notebook and loose slips, along with retracted statements, could sustain an allegation of clandestine removal.

Analysis: The demand rested only on private records and statements recorded during investigation. The principal statement was retracted promptly and again during cross-examination. The Revenue did not produce corroborative material such as evidence of excess raw material procurement, transport, buyers, flow back of funds, or other tangible links necessary to establish clandestine manufacture and clearance. The private records were explained as sale projections and targets, and the few dealer statements relied upon were also retracted.

Conclusion: The allegation of clandestine removal was not proved, and the demand founded on such material could not be sustained.

Issue (ii): Whether duty demand, confiscation and penalties in respect of goods found at dealers' premises could be upheld in the absence of evidence of clandestine clearance.

Analysis: Goods found in the market or at dealers' premises are treated as duty paid unless the Revenue establishes otherwise by sufficient evidence. Since the foundational allegation of clandestine removal against the manufacturer failed, the goods seized from dealers' premises could not be treated as illicitly cleared goods. The corresponding demand, confiscation and penalties therefore lacked support.

Conclusion: The demand, confiscation and penalties relating to the dealers' premises were unsustainable and were set aside.

Issue (iii): Whether shortages and excesses found in the assessee's premises justified duty demand or confiscation.

Analysis: The shortages and excesses were found to be marginal and within permissible tolerance, and no independent material showed that they represented clandestine removals. Mere shortages or excesses, without corroboration, do not establish suppression of production or clearance.

Conclusion: The duty demand and confiscation based on shortages and excesses were not justified and were set aside.

Final Conclusion: The assessees succeeded on the substantive issues, the Revenue's challenge did not survive once the main demand was rejected, and the impugned liabilities of duty, confiscation and penalties were annulled.

Ratio Decidendi: Allegations of clandestine removal under central excise law must be proved by positive, corroborative evidence, and private records or retracted statements alone are insufficient to sustain duty demand, confiscation or penalty.

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