Clandestine removal demands corroborative evidence; untested statements and bank entries alone cannot sustain duty or penalties.

Demand for duty based mainly on buyers' statements and bank-account entries cannot stand unless those materials are tested through effective cross-examination and supported by independent corroboration. The note explains that, where witnesses do not appear or cannot confirm the facts, and the records do not show that account credits are sale proceeds of the alleged goods, evidentiary value is insufficient. It also states that clandestine manufacture and clearance must be proved with credible clinching material such as seized goods, raw material discrepancies, transport records, or excess power consumption; absent such proof, duty, interest and penalties cannot survive.

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Issues: (i) Whether the demand of duty could be sustained on the basis of statements of buyers and bank-account entries without effective cross-examination and corroboration; (ii) Whether the department had proved clandestine manufacture and clearance, including alleged manufacture of aluminium cables, so as to justify the duty, interest and penalties.

Issue (i): Whether the demand of duty could be sustained on the basis of statements of buyers and bank-account entries without effective cross-examination and corroboration.

Analysis: The demand rested substantially on statements recorded during investigation and on deposits made in certain bank accounts. In adjudication, statements relied upon to fasten liability must have evidentiary value, and where the case is built mainly on oral statements without independent corroboration, cross-examination becomes necessary to test their truth. The record showed that the witnesses either did not appear for cross-examination or stated that they did not remember the facts, and the material did not establish that the payments in the accounts necessarily represented sale proceeds of goods manufactured by the assessee.

Conclusion: The demand could not be sustained on the uncorroborated statements and bank-account entries.

Issue (ii): Whether the department had proved clandestine manufacture and clearance, including alleged manufacture of aluminium cables, so as to justify the duty, interest and penalties.

Analysis: The department did not produce credible clinching evidence of clandestine removal such as seizure of unaccounted goods or raw material, excess production evidence, unaccounted transport documents, or excess power consumption. The assessee's lack of infrastructure to manufacture aluminium cables was not rebutted by positive evidence, and the presumption that all receipts in the concerned accounts represented clearances of the assessee was not established. Once the duty demand failed, the consequential penalties also could not survive.

Conclusion: Clandestine removal was not proved, and the duty, interest and penalties were set aside.

Final Conclusion: The appeal succeeded and the assessee obtained full relief against the confirmed duty and consequential penal consequences.

Ratio Decidendi: A demand for clandestine removal must be supported by credible corroborative evidence, and when the case is founded mainly on witness statements, their evidentiary value cannot be accepted without meaningful cross-examination and supporting material.

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