Clandestine removal demands corroborative evidence; unverified statements and third-party seizures cannot sustain confiscation, duty demand, or penalties.

Clandestine removal allegations require independent, tangible, and corroborative evidence; here, the department relied mainly on third-party seizures, statements, and private records, while the factory stock was reconciled and no unaccounted goods, transporter confession, or employee admission was found. Because the seized goods were correlated with invoices in several instances and the relied-upon statements were retracted, unsupported, or uncorroborated, confiscation and the duty demand were not sustainable. As the foundational allegation failed, the penalties on the assessee, its director, and other persons also fell away for want of proved involvement or knowledge, and the duty, confiscation, and penalties were set aside.

---

---

Issues: (i) whether the seized goods were liable to confiscation and the duty demand arising from the alleged clandestine removal was sustainable; (ii) whether the penalties imposed on the assessee, its director, and others could be sustained.

Issue (i): Whether the seized goods were liable to confiscation and the duty demand arising from the alleged clandestine removal was sustainable.

Analysis: The allegations were founded principally on seizures from third-party premises, statements, and private records. No discrepancy was found in the factory stock of raw materials or finished goods, no unaccounted goods were seized from the assessee's factory, and no transporter or employee of the assessee gave any confession of clandestine manufacture or removal. The goods seized from different locations were correlated with invoices and other documentary material in several instances, and the statements relied upon by the department were either retracted, unsupported, or uncorroborated. The charge of clandestine removal, being a serious one, required independent, tangible, and cogent evidence, which was absent.

Conclusion: The confiscation of the seized goods and the duty demand based on alleged clandestine removal were not sustainable.

Issue (ii): Whether the penalties imposed on the assessee, its director, and others could be sustained.

Analysis: Once the allegation of clandestine manufacture and removal failed, the foundation for penalty disappeared. The record also did not establish the requisite knowledge or involvement of the persons penalised so as to justify penal consequences. The enhancement of penalty on the director was also unsupported by a sustainable finding of liability in the absence of proved clandestine removal.

Conclusion: The penalties imposed on the assessee, its director, and the other appellants were not sustainable.

Final Conclusion: The appeals succeeded, the impugned duty demand, confiscation, and penalties were set aside, and consequential relief followed in accordance with law.

Ratio Decidendi: A charge of clandestine manufacture and removal must be proved by independent, tangible, and corroborative evidence and cannot be sustained merely on statements, assumptions, or uncorroborated suspicion.

---