Clandestine removal claims fail without credible evidence; theoretical electricity norms and assumptions cannot prove suppressed manufacture.

Allegations of clandestine removal cannot be sustained on theoretical norms, presumptions or uncorroborated expert opinion. The article notes that a duty demand based on inferred electricity consumption, assumed process loss and cost comparison failed because no factory-specific technical verification or positive evidence of actual suppressed manufacture and clearance was produced. It further states that suspicion cannot replace proof, expert opinion under the Evidence Act is only advisory, and tax can be levied only by authority of law. On that basis, the demand, interest and penalties were set aside for want of credible evidence.

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Issues: (i) Whether the demand of duty and penalties could be sustained on the basis of alleged clandestine removal inferred from electricity consumption, process loss and cost comparison; (ii) whether the material relied upon by the department constituted sufficient and reliable evidence to prove suppressed manufacture and clearance.

Issue (i): Whether the demand of duty and penalties could be sustained on the basis of alleged clandestine removal inferred from electricity consumption, process loss and cost comparison.

Analysis: The alleged clandestine removal rested primarily on assumptions drawn from a case-study based electricity consumption norm, an asserted process loss of about 18%, and a comparison between cost of production and sale price. The recorded material did not show that any factory-specific experiment or independent technical verification was undertaken to fix the electricity norm for the assessee's unit. The adverse inference from process loss was also unsupported by any authoritative literature or expert basis. The comparative cost analysis was not decisive, particularly when the assessee produced a Chartered Accountant certificate indicating profit and the authority did not meaningfully deal with that evidence.

Conclusion: The duty demand and penalties could not be sustained on these assumptions and theoretical calculations.

Issue (ii): Whether the material relied upon by the department constituted sufficient and reliable evidence to prove suppressed manufacture and clearance.

Analysis: The Court held that clandestine removal must be established by authentic, reliable and credible evidence, because suspicion, however strong, cannot replace proof. Expert opinion under Section 45 of the Indian Evidence Act, 1872 is only advisory and must be supported by factual evidence. In the absence of positive evidence proving actual manufacture and removal of the alleged suppressed quantity, the department's case remained unsubstantiated. Article 265 of the Constitution of India also reinforces that tax can be levied only by authority of law and not on hypothesis.

Conclusion: The evidence was insufficient to establish clandestine manufacture or clearance.

Final Conclusion: The appeals succeeded and the order confirming duty, interest and penalties was set aside for want of proof of clandestine removal.

Ratio Decidendi: Allegations of clandestine removal cannot be sustained on theoretical norms, presumptions or uncorroborated expert opinion; the department must prove suppressed manufacture and clearance by credible, substantive evidence.

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