Clandestine removal allegations fail where statements lacked corroboration and cross-examination was denied, invalidating the duty demand.

Allegations of clandestine receipt of inputs and clandestine clearance of finished goods could not be sustained where the Revenue relied mainly on recorded statements but produced no independent corroborative evidence of procurement, manufacture, or removal. The tribunal held that a mere statement, without supporting material or discrepancies at the assessee's premises, was insufficient to prove such serious charges. It further found that the statements were not tested in accordance with Section 9D and that effective cross-examination was denied, undermining the evidentiary basis of the demand. In the absence of tangible proof, the duty demand and connected penalties were set aside.

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Issues: Whether the demand of duty and penalties could be sustained on allegations of clandestine receipt of inputs and clandestine clearance of finished goods when the Revenue relied mainly on statements recorded during investigation and there was no corroborative evidence or compliance with the requirement of cross-examination.

Analysis: The allegation of clandestine manufacture and clearance rested on statements recorded during investigation and the inference drawn from them. No discrepancy was found at the assessee's premises, and the Revenue did not produce independent corroborative material to prove procurement of duty-free inputs, their use in manufacture, or clandestine clearance of the final product. A mere statement, without supporting evidence, was held insufficient to establish such serious allegations. The statements forming the basis of the demand were also not tested in accordance with Section 9D, and the assessee was not afforded effective cross-examination, which rendered the evidentiary foundation unsustainable. In the absence of tangible evidence, the charge remained unproved.

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

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