Admitted stock shortage and unexplained loose slips can sustain a clandestine removal demand when records and explanation are absent.

Admitted shortage of finished excisable goods, coupled with failure to maintain contemporaneous stock and production records, can support a demand where the explanation is unsupported by evidence. Here, the claimed recycling of defective ingots was not backed by records, so the shortage was treated as unrebutted. Loose slips were also left unexplained, and the person said to know their contents was not produced, justifying adverse inference. On that basis, the material was sufficient to sustain the finding of clandestine removal and the resulting duty, interest, and penalty.

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Issues: Whether the demand of central excise duty could be sustained on the basis of shortage of finished goods and recovered loose slips, and whether the appellant's explanation for the shortage displaced the finding of clandestine removal.

Analysis: The shortage of M.S. ingots was not denied, and the explanation that defective ingots were kept for recycling or remanufacture was unsupported by any record. Rule 10 of the Central Excise Rules, 2002 required proper daily maintenance of production and stock records, which was not complied with. The admitted shortage and the absence of records were treated as admissions requiring no further proof. As to the loose slips, no explanation was produced for them, and the person said to have knowledge of the documents was not produced before the adjudicating authority. In these circumstances, adverse inference was drawn and the allegation of clandestine removal was sustained.

Conclusion: The demand and the findings of clandestine removal were upheld, and the appellant's challenge failed.

Final Conclusion: The order confirming duty demand, interest, and penalty was sustained because the appellant failed to rebut the proved shortage or the documents supporting clandestine clearance.

Ratio Decidendi: Where shortage of excisable goods is admitted and no contemporaneous records or credible explanation are produced, the authority may sustain the demand and draw adverse inference from unrebutted documentary material indicating clandestine removal.

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