Clandestine removal requires tangible corroboration; private records and unsupported statements were insufficient to sustain duty and penalties.

Demand of duty for alleged clandestine manufacture and removal of M.S. ingots failed because private records, loose sheets and unsupported statements were held insufficient without corroborative evidence. The Tribunal stressed that clandestine removal is a serious quasi-criminal allegation and must be proved by tangible material such as extra raw material procurement, excess electricity use, labour payment records, transport evidence and flow of funds. It also noted the need to examine the author of documents under Section 9D of the Central Excise Rules, 1944. On that basis, the duty demand and penalties were set aside.

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Issues: Whether the demand of duty and penalties for alleged clandestine manufacture and removal of M.S. ingots could be sustained on the basis of private records, loose sheets and statements without corroborative evidence.

Analysis: The confirmation of duty was found to rest on presumption and possibilities rather than proof. The private records and loose sheets were not treated as sufficient evidence of clandestine manufacture or removal in the absence of proper verification and corroboration. The Tribunal held that clandestine removal, being a serious and quasi-criminal allegation, must be established by tangible evidence such as extra procurement of raw materials, excess electricity consumption, proof of labour payment, transport evidence and flow of funds. It was also noted that the statements of buyers and transporters were unsupported by documentary proof, and that the record did not show any extra payment to labourers or other indicators of suppressed production. Reference was made to the requirement of examination of the author of documents under Section 9D of the Central Excise Rules, 1944.

Conclusion: The demand of duty and the penalties imposed under Rule 25 of the Central Excise Rules, 2002 and Section 11AC of the Central Excise Act, 1944 could not be sustained and were set aside.

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