Clandestine removal allegations fail where shortage of work-in-progress is unsupported by direct, corroborative evidence and an evidentiary chain.

Alleged shortage of work-in-progress, by itself, was insufficient to prove clandestine manufacture and removal of goods without payment of duty. The record did not show what finished goods were produced from the short stock, how they were cleared, to whom they were supplied, or the transport mode used, and no tangible, direct or corroborative evidence completed the evidentiary chain. In the absence of such proof, demand and penalties could not rest on presumption alone and were held unsustainable, with the order confirming them liable to be set aside in favour of the assessee.

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Issues: Whether the demand and penalties were sustainable on the basis of alleged shortage of work-in-progress and the inference of clandestine manufacture and removal without payment of duty.

Analysis: The alleged shortage of work-in-progress, by itself, was not enough to sustain a charge of clandestine removal. No investigation was undertaken to establish what finished goods were allegedly manufactured from the short stock, how those goods were cleared, to whom they were supplied, or by what transport mode the goods were removed. The record lacked the tangible, direct and corroborative evidence ordinarily required to prove clandestine manufacture and removal. In the absence of such a complete evidentiary chain, the demand could not rest on presumption alone.

Conclusion: The demand and penalties were not sustainable, and the order confirming them was liable to be set aside, in favour of the assessee.

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