Clandestine removal demands require concrete corroborative evidence; assumptions and theoretical production norms are not enough.

Central excise duty demand based on alleged clandestine removal cannot be sustained on assumed input-output ratios or theoretical production norms alone. Where the department relies on comparison with other units and a presumed 1:1 consumption pattern, it must still produce positive corroborative evidence such as excess raw material, unaccounted finished goods, buyer or transporter statements, or unaccounted cash. In the absence of such material, clandestine removal remains unproved and the demand is legally unsustainable. The note also reflects the constitutional principle that tax can be levied or collected only by authority of law.

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Issues: Whether the demand of central excise duty on the allegation of clandestine removal could be sustained on the basis of an assumed input-output ratio and the absence of corroborative evidence.

Analysis: The demand was founded on a comparison with the production pattern of other units and an assumed 1:1 input-output ratio. No excess raw material, unaccounted final goods, buyer or transporter statements, unaccounted cash, or other corroborative material was brought on record. Clandestine removal is a serious allegation and must be proved by positive and concrete evidence; it cannot rest on hypothesis, theoretical calculations, or estimation. A demand based merely on assumptions, without proof of actual manufacture and removal, is not sustainable. Article 265 of the Constitution of India reinforces that tax can be levied or collected only by authority of law.

Conclusion: The allegation of clandestine removal was not proved, and the duty demand was unsustainable, in favour of the assessee.

Ratio Decidendi: A demand for excise duty on clandestine removal must be supported by tangible, corroborative evidence of manufacture and removal, and cannot be upheld on mere assumptions, estimates, or theoretical production norms.

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