Clandestine removal evidence requires corroboration; unverified third-party records and defective electronic proof cannot sustain excise demands.

Clandine removal demands under excise law require cogent, corroborated evidence, and unverified pen-drive data or third-party documents cannot be relied on unless the statutory requirements for admissibility of electronic records are met. Transporter challans, private diaries and similar material, without independent proof of movement, receipt, buyer confirmation or sale proceeds, are insufficient. Cenvat credit on imported scrap and dealer invoices is supported where bills of entry, banking records and valid invoices exist, and minor procedural lapses do not by themselves defeat credit absent evidence of non-receipt or diversion. Entries from job-worker or dealer premises, without linkage to the assessee through independent evidence, cannot sustain duty demand or confiscation.

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Issues: (i) whether the demands alleging clandestine removal could be sustained on the basis of pen-drive data, transporter challans, private diaries and other third-party records without corroborative evidence and without compliance with Section 36B of the Central Excise Act, 1944; (ii) whether denial of cenvat credit on imported aluminium scrap and invoices of a dealer was justified; and (iii) whether the demand and confiscation relating to goods found at job-worker and dealer premises could be sustained on the basis of third-party records.

Issue (i): Whether the demands alleging clandestine removal could be sustained on the basis of pen-drive data, transporter challans, private diaries and other third-party records without corroborative evidence and without compliance with Section 36B of the Central Excise Act, 1944.

Analysis: The electronic data relied upon by the Revenue was not shown to have been copied from any identified source computer, and the procedure prescribed for admissibility of electronic records was not followed. The pen-drive was treated as a personal device, the author of the entries was not satisfactorily established, and the decoded entries were not supported by independent evidence. The transporter documents were internal records of a third party, there was no LR or GR note, no driver was examined, no buyer statement confirming receipt of goods was relied upon, and no check-post or movement evidence was produced. The Court held that clandestine removal must rest on cogent, corroborated evidence and not on suspicion, assumptions, or unverified third-party material.

Conclusion: The demands based on alleged clandestine clearances were not sustainable.

Issue (ii): Whether denial of cenvat credit on imported aluminium scrap and invoices of a dealer was justified.

Analysis: The imported scrap was purchased on high-sea sale basis through valid bills of entry and payment was made through banking channels. The Revenue's case that the goods were first delivered to another unit was not enough to establish non-receipt by the appellant in the absence of direct evidence of diversion or contrary disposal. As to the dealer invoices, mere procedural omissions such as non-mention of vehicle numbers or mode of transport could not defeat credit where the invoices were otherwise valid and there was no significant evidence to show that the goods were not received or used in manufacture.

Conclusion: Denial of cenvat credit was not justified.

Issue (iii): Whether the demand and confiscation relating to goods found at job-worker and dealer premises could be sustained on the basis of third-party records.

Analysis: The alleged discrepancies at anodizer, processor, dealer and other third-party premises only showed that those entities were not maintaining records properly. No inquiry at the manufacturer's end established clandestine manufacture or removal, and no independent evidence of transport, consideration, buyer receipt, or suppression of production was produced. The Court held that entries in third-party records, without linkage to the appellant through corroborative evidence, could not form the basis of duty demand or confiscation.

Conclusion: The demand and confiscation relating to such third-party material were not sustainable.

Final Conclusion: The impugned order confirming duty, denial of credit, penalties and confiscation was set aside, and the appeals were allowed with consequential relief.

Ratio Decidendi: A demand of excise duty for clandestine removal cannot be sustained on uncorroborated third-party records or electronic data unless the statutory requirements for electronic evidence are met and the Revenue produces independent, tangible evidence linking the assessee to manufacture, removal, transport and receipt of sale proceeds.

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