Clandestine removal claims need corroboration; untested statements and unsupported allegations could not sustain duty and penalties.

Allegations of clandestine manufacture and removal of unbranded chewing tobacco require admissible, corroborated evidence. The Tribunal noted that invoices, transport papers, affidavits and purchase records supported the claim that the pouch packing machines and raw materials were recently acquired and only trial runs had taken place. It also held that statements recorded at search and not offered for cross-examination could not be relied on against the assessee. In the absence of corroboration such as proof of actual clearances, identified buyers, sale proceeds, recovered finished goods or supporting electricity data, the duty demand and penalties were set aside.

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Issues: Whether the demand of duty and penalties based on alleged clandestine manufacture and clearance of unbranded chewing tobacco could be sustained when the adjudicating authority denied cross-examination of witnesses, rejected the documentary evidence produced by the appellants, and relied primarily on untested statements recorded at the time of search.

Analysis: The appellants produced invoices, transport documents, affidavits, and purchase records to support the case that the four pouch packing machines and raw materials were acquired shortly before the search and that only trial runs had taken place. The Original Authority treated these documents as fabricated and confirmed duty and penalties mainly on the basis of statements recorded on the date of search. The Tribunal found that the seller-appellants and transporter before it affirmed the authenticity of the documents relied upon by Shri Srikant Chaurasia. It further held that statements not offered for cross-examination could not be treated as admissible evidence. The record also lacked the kinds of corroborative material normally required to establish clandestine removal, such as proof of actual clearances, sales to identified buyers, sale proceeds, recovery of finished goods in the market, or evidence of electricity consumption supporting large-scale production.

Conclusion: The duty demand and penalties were not sustainable and were set aside.

Final Conclusion: The appeals succeeded, with consequential relief granted in accordance with law.

Ratio Decidendi: Allegations of clandestine manufacture and clearance must be proved by admissible, corroborated evidence, and statements relied upon by the Revenue cannot be used against an assessee unless the persons concerned are made available for cross-examination.

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