Clandestine removal and excise limitation: duty demand failed without independent evidence, and the time-bar plea was rejected.

Excise duty could not be demanded merely on the basis of an alleged excess stock declaration to a bank where the discrepancy was explained by corrective adjustments, the departmental stock verification was accepted, and there was no independent evidence of clandestine removal or manipulation of statutory records. The limitation plea was also rejected because the order treated proceedings for escaped excise duty assessment as outside the statutory bar relied on by the assessee. The revision therefore succeeded on merits and the excise demand was set aside.

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Issues: (i) whether duty could be demanded on the basis of alleged excess stock shown to the bank without evidence of clandestine removal; (ii) whether the plea of limitation under the excise law was sustainable against a demand arising from escaped assessment or removal without payment of duty.

Issue (i): whether duty could be demanded on the basis of alleged excess stock shown to the bank without evidence of clandestine removal

Analysis: The discrepancy in bank statements was treated as explained by subsequent corrective adjustments and by the accepted stock verification carried out with departmental participation. The statutory excise records were not shown to have been manipulated, and there was no independent evidence of removal of goods without payment of duty. In the absence of proof of clandestine removal, the mere inflated bank declaration could not displace the regular excise records.

Conclusion: The finding was in favour of the assessee; duty demand on this basis was not justified.

Issue (ii): whether the plea of limitation under the excise law was sustainable against a demand arising from escaped assessment or removal without payment of duty

Analysis: The limitation argument based on the statutory bar for initiating proceedings after a specified period was considered against the distinction between prosecution and assessment. On the view accepted in the order, assessment proceedings for excise duty, where the goods are alleged to have escaped duty, do not fall within the limitation bar in the manner suggested by the petitioners. The order therefore rejected the contention that the demand was time-barred.

Conclusion: The limitation plea was held to be unsustainable.

Final Conclusion: The revision succeeded on merits and the challenge to the excise demand was accepted.

Ratio Decidendi: A duty demand based on alleged excess stock cannot be sustained without evidence of clandestine removal, and the statutory limitation plea does not bar excise assessment proceedings in a case of escaped duty.

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