Electronic evidence and corroboration govern clandestine removal claims, while undervaluation stands on reliable invoice-price comparison.

Demand for clandestine removal based solely on pen drive data was held unsustainable because the electronic material did not satisfy statutory admissibility requirements and was not backed by independent corroboration such as stock, raw material, electricity, transporter, or other tangible evidence; statements relied on were also not properly tested through cross-examination, so that component was set aside. The undervaluation demand was sustained because the records showed a reliable comparison between invoices and recovered price data, and the assessee accepted liability to the differential amount. The result was partial relief, with only the undervaluation demand surviving.

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Issues: (i) Whether the demand based on data recovered from pen drives and alleged clandestine removals was sustainable in the absence of compliance with the statutory requirements for admissibility of electronic records and corroborative evidence; (ii) Whether the demand on account of undervaluation was justified.

Issue (i): Whether the demand based on data recovered from pen drives and alleged clandestine removals was sustainable in the absence of compliance with the statutory requirements for admissibility of electronic records and corroborative evidence.

Analysis: The demand for clandestine removal rested principally on information retrieved from pen drives. The statutory procedure governing admissibility of computer output was not followed, and the material was not supported by independent corroboration such as evidence of excess raw material consumption, excess electricity use, transporter records, stock discrepancy, or other tangible indicia of clandestine manufacture and clearance. The statements relied upon were also not tested through cross-examination in the manner required for their evidentiary use.

Conclusion: The demand relating to clandestine removal was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the demand on account of undervaluation was justified.

Analysis: On the undervaluation component, the record showed that the assessee accepted liability to the extent of the differential amount found from the comparison of invoices and corresponding price data. The materials established that goods of the same quantity were shown at a higher value in the recovered records than in the invoices issued.

Conclusion: The undervaluation demand was upheld in favour of the Revenue.

Final Conclusion: The appeal succeeded on the clandestine removal component but failed on the undervaluation component, resulting in only the undervaluation demand being sustained with consequential relief on the remaining demand.

Ratio Decidendi: A demand for clandestine removal cannot rest solely on uncorroborated electronic records unless the statutory requirements for admissibility are satisfied and the allegation is supported by independent tangible evidence; separate proof is required for an undervaluation demand based on reliable comparison of actual and declared values.

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