Clandestine removal demands require admissible electronic evidence and independent corroboration; unauthenticated printouts and estimated shortages fail.

A clandestine removal demand in central excise failed where the electronic printouts and data were not proved in compliance with mandatory rules for electronic evidence, making them unsafe to rely on. The search and seizure material was also rejected because the panchanamas were inconsistent, cross-examination of relied-upon witnesses was denied, and no independent corroboration such as raw material excess, power use, transport evidence, or cash flow evidence was produced. Alleged shortages based on eye estimation and average weight, without actual weighment or positive proof, were insufficient. The duty demand, interest, and penalties were therefore set aside.

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Issues: (i) Whether the demand for clandestine removal based on seized electronic data and loose papers could be sustained when the electronic record was not proved in accordance with the mandatory requirements governing electronic evidence. (ii) Whether the search, seizure, and reliance on panchanamas and statements were valid when cross-examination was denied and the recovery was not supported by corroborative evidence. (iii) Whether the alleged shortage and clandestine clearance could be upheld on the basis of average weight and estimation without positive proof.

Issue (i): Whether the demand for clandestine removal based on seized electronic data and loose papers could be sustained when the electronic record was not proved in accordance with the mandatory requirements governing electronic evidence.

Analysis: The demand rested substantially on printouts and data allegedly recovered from an external storage device and laptop. The electronic record was held unreliable because the statutory safeguards for proving electronic evidence were not complied with, including the required certificate and proper proof of source and authenticity. The absence of compliance with the evidentiary requirements rendered the computer printouts unsafe to rely upon for confirming duty demand.

Conclusion: The electronic evidence could not be relied upon, and the demand based on such material was not sustainable.

Issue (ii): Whether the search, seizure, and reliance on panchanamas and statements were valid when cross-examination was denied and the recovery was not supported by corroborative evidence.

Analysis: The search and seizure process was found doubtful because the sealing, de-sealing, and retrieval process was not satisfactorily established, the panchanamas were inconsistent, and the requested cross-examination of panch witnesses and other relied-upon persons was denied. The statements alone, without testing by cross-examination and without independent corroboration, were insufficient to support the allegation of clandestine removal. The evidentiary record lacked supporting proof such as raw material excess, electricity consumption, labour evidence, transport evidence, or cash flow evidence.

Conclusion: The search-related evidence and witness statements were not legally sufficient to sustain the demand or penalties.

Issue (iii): Whether the alleged shortage and clandestine clearance could be upheld on the basis of average weight and estimation without positive proof.

Analysis: The shortage was computed by eye estimation and average weight methodology rather than actual weighment. Such estimation, by itself, did not establish clandestine clearance. In the absence of tangible, affirmative, and corroborative evidence, the alleged shortages and removals could not be treated as proved.

Conclusion: The shortage-based demand also failed for want of reliable proof.

Final Conclusion: The impugned duty demand, interest, and penalties were unsustainable in law and were set aside, with all appeals allowed.

Ratio Decidendi: A charge of clandestine removal in central excise must be proved by legally admissible electronic evidence and independent corroboration, and cannot rest on unauthenticated printouts, untested statements, or estimated shortages alone.

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