Clandestine removal demands require corroborative evidence, and non-compliant electronic records cannot sustain excise liability.

Clandestine removal allegations in excise proceedings must rest on positive, tangible and corroborative evidence, not on assumptions, loose papers or third-party material alone. Where the department relies on electronic data, the record must comply with the statutory safeguards for admissibility of electronic evidence, including the requirements applicable to Section 36B of the Central Excise Act, 1944. In the absence of supporting proof such as excess raw material, excess electricity use, transport evidence or sale proceeds, the evidentiary basis for duty, interest and penalty is not sustainable.

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Issues: Whether the demand of duty, interest and penalty based on third-party records and electronic data could be sustained in the absence of corroborative evidence and compliance with the evidentiary safeguards for electronic records.

Analysis: The appeal was founded on alleged clandestine procurement and removal, but the material relied upon consisted mainly of loose documents, third-party records and electronic data. The findings were tested against the settled requirement that clandestine removal cannot be inferred on assumptions or presumptions and must be proved by positive, tangible and corroborative evidence. The Tribunal also noted that the electronic data was burnt into CDs and later retrieved without the safeguards contemplated by Section 36B of the Central Excise Act, 1944, and without the requisite certificate and procedural compliance for electronic records. In the absence of reliable corroboration such as excess raw material, excess electricity, transport evidence, sale proceeds or other direct evidence, the evidentiary foundation of the demand was held to be unsustainable.

Conclusion: The demand and penalties could not be sustained on the basis of uncorroborated third-party material and non-compliant electronic evidence, and the issue was decided in favour of the appellant.

Final Conclusion: The impugned order was set aside and the appeal was allowed.

Ratio Decidendi: Allegations of clandestine removal must be proved by reliable corroborative evidence, and electronic records relied upon in excise proceedings must satisfy the statutory safeguards governing admissibility.

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