Clandestine removal demands need corroboration; third-party computer data alone was insufficient, and Rule 26 penalty against the company failed.

Demand of Central Excise duty based solely on third-party computer data was held unsustainable because there was no corroborative evidence from transporters or drivers, no proof of raw material receipt or manufacture, and the director denied the alleged clearances; the allegation of clandestine removal could not be upheld on uncorroborated records alone, so the demand was set aside. Penalty under Rule 26 was also held unsustainable against a private limited company on the facts, so the penalty was set aside and consequential relief followed.

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Issues: (i) Whether the demand of Central Excise duty based only on third-party computer data, without corroborative evidence, could sustain a finding of clandestine clearance. (ii) Whether penalty under Rule 26 could be imposed on a private limited company.

Issue (i): Whether the demand of Central Excise duty based only on third-party computer data, without corroborative evidence, could sustain a finding of clandestine clearance.

Analysis: The demand rested on data recovered from a laptop belonging to a third party, but there was no supporting investigation from the transporter or truck drivers, no corroborative evidence of receipt of raw material, manufacture, or clandestine clearance, and the director of the appellant specifically denied the alleged clearances. A charge of clandestine removal requires reliable supporting evidence and cannot be upheld on uncorroborated third-party records alone.

Conclusion: The demand was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether penalty under Rule 26 could be imposed on a private limited company.

Analysis: Rule 26 contemplates penalty for persons who deal with goods in a manner attracting penal consequences, but the appellant was a corporate entity. On the facts, the penalty imposed on the company was held to be unsustainable.

Conclusion: The penalty on the private limited company was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The impugned order was set aside and all the appeals were allowed with consequential relief.

Ratio Decidendi: A finding of clandestine removal cannot be sustained on uncorroborated third-party records alone, and penalty under Rule 26 is not maintainable against a corporate body on the facts of the case.

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