Clandestine removal demands fail where third-party ledgers, retracted statements and no corroboration do not prove excise liability.

Demands for central excise duty, interest and penalty based on alleged clandestine manufacture and removal were found unsustainable where the department relied mainly on third-party handwritten ledgers, computerised extracts and retracted statements. The evidentiary material was treated as unreliable because the ledgers were illegible, the witnesses who explained the entries were not produced for cross-examination, and the documents from the appellant's premises were unsigned and not properly confronted. In the absence of corroboration such as proof of raw material procurement, transport, electricity use, sale proceeds, buyers or flow back of funds, the allegations of clandestine removal were not proved and the impugned order was set aside.

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Issues: Whether the demands of central excise duty, interest and penalty for alleged clandestine manufacture and removal could be sustained on the basis of third-party handwritten ledgers, computerised extracts and retracted statements without corroborative evidence and without producing the witnesses for cross-examination.

Analysis: The appeal turned on the evidentiary value of the documents recovered from a third party and the statements recorded under Section 14 of the Central Excise Act, 1944. The ledgers relied upon were not legible, the computerised charts were prepared from them, and the witnesses whose statements explained those entries were not made available for cross-examination. The statements were also retracted. The documents recovered from the appellant's premises were unsigned and were never properly confronted. In the absence of supporting evidence such as proof of raw material procurement, transport, electricity consumption, sale proceeds, buyers or flow back of funds, the allegations of clandestine removal were not proved.

Conclusion: The demand, interest and penalty were held unsustainable and the impugned order was set aside.

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