Retracted statement and lack of corroboration defeated duty demand for alleged diversion of sulphuric acid in SSP manufacture.

Demand and penalties based mainly on a director's retracted statement could not be sustained where the statement was unsupported by independent corroboration. The Revenue failed to prove diversion of duty-free sulphuric acid, identify any alleged purchasers, or establish that spent sulphuric acid had been procured and used in manufacture of Single Super Phosphate. Chapter X verification and AR-3 records did not support the allegation, as the records showed receipt from a sulphuric acid manufacturer and no technical material proved that SSP could be made from spent sulphuric acid. On the record, the allegations remained unproven and the demand and penalties were held unsustainable.

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Issues: Whether the demand of duty and penalties could be sustained on the basis of the director's retracted statement alleging diversion of duty-free sulphuric acid and use of spent sulphuric acid instead of sulphuric acid for manufacture of Single Super Phosphate fertilizer.

Analysis: The demand was founded principally on the director's statement, but that statement was promptly retracted. No independent and reliable evidence was brought on record to prove diversion of duty-free sulphuric acid, the identity of the alleged purchasers, or procurement of spent sulphuric acid from any source. The verification under Chapter X procedure and AR-3 documentation also did not advance the Revenue's case, since the records showed receipt from a sulphuric acid manufacturer and the Revenue did not establish that the consignment was in fact spent sulphuric acid. The authorities also did not produce technical material to show that SSP could be manufactured from spent sulphuric acid.

Conclusion: The Revenue failed to prove the allegations with corroborative evidence, and the demand and penalties were unsustainable.

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