Clandestine removal demands need corroborative evidence; loose papers and estimated stock shortages alone are insufficient.

Allegations of clandestine removal in central excise must be supported by tangible corroborative evidence, not merely loose papers, estimated stock shortages or presumptive inferences. The record did not establish who authored the loose papers, whether they reflected actual clearances, or whether the entries were verified through buyers, transporters, raw material purchases, production data or power consumption. Stock verification based on sectional weight and estimation was found insufficient by itself to prove actual shortage or clandestine removal. On that basis, the demand and penalty were held unsustainable and the assessee succeeded.

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Issues: Whether the demand of central excise duty and the penalty were sustainable on the basis of loose papers, stock shortage and statements, in the absence of corroborative evidence of clandestine removal.

Analysis: The demand was founded on loose papers recovered during search, physical verification of stock, and the statement of a director. The material on record did not establish who authored the loose papers, whether they related to actual clearances, or whether the alleged entries were verified with buyers, transporters, excess raw material purchases, production data, or power consumption. The stock verification was found to be based on sectional weight and estimation, which could not by itself prove actual shortage or clandestine removal. Mere loose papers, estimated shortages, and payment of duty without protest were held insufficient without independent corroboration.

Conclusion: The demand and penalty were not sustainable, and the findings were in favour of the assessee.

Ratio Decidendi: Allegations of clandestine removal must be proved by tangible and corroborative evidence, and cannot rest solely on loose papers, estimated stock shortages, or presumptive inferences.

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