Clandestine removal demands need independent corroboration; third-party diary entries and statements alone are insufficient.

Demand of duty and penalty for alleged clandestine removal cannot be sustained on third-party diary entries and an accompanying statement alone. The record must also contain independent corroborative evidence showing clandestine manufacture, removal of goods, and identification of buyers or recipients. Where the assessee's statement does not amount to an admission and there is no evidence of movement of goods or enquiry from alleged buyers, third-party material remains insufficient. On that basis, the duty demand and consequential penalty on the director were held unsustainable, and the impugned order was set aside.

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Issues: Whether the demand of duty and penalty could be sustained on the basis of a third-party diary and statement without independent corroborative evidence of clandestine manufacture and removal.

Analysis: The demand rested on entries in the diary of a broker and the accompanying statement, but the appellant's statement did not amount to an admission of clandestine clearances. The record showed no independent evidence of movement of goods, no evidence identifying buyers, and no enquiry from alleged recipients. In such circumstances, third-party records by themselves were insufficient to uphold a finding of clandestine removal. The penalty imposed on the director was also consequential to the unsustainable demand.

Conclusion: The issue was decided in favour of the assessee. The duty demand and consequential penalties were not sustainable.

Final Conclusion: The appeal succeeded and the impugned order was set aside, including the penalty imposed on the director.

Ratio Decidendi: A demand for clandestine removal cannot be upheld solely on third-party records or statements unless supported by independent corroborative evidence establishing clandestine manufacture, removal, and the flow of goods to buyers.

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