Clandestine removal demands corroborative evidence; unverified seized papers alone cannot sustain duty, while SSI exemption followed turnover findings.

Clandestine removal requires direct, affirmative and corroborative evidence; records seized from an accountant's residence and his statement, without proof of raw material receipt, electricity use, labour, transport, buyers, sale proceeds or examination of named persons, were insufficient to sustain the duty demand. The turnover reflected in the excise return was below the threshold for small scale industry exemption under Notification No. 8/2003-CE, so the exemption was available on the facts found. The demand, interest and penalty were therefore set aside.

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Issues: (i) Whether the demand of duty based only on documents seized from the accountant's residence and his statement could sustain a charge of clandestine removal; (ii) Whether the appellant was entitled to the benefit of small scale industry exemption in view of its turnover.

Issue (i): Whether the demand of duty based only on documents seized from the accountant's residence and his statement could sustain a charge of clandestine removal.

Analysis: The demand was founded solely on records recovered from the residence of the accountant, who was said to be the author of those papers. No corroboration was produced regarding receipt of raw material, consumption of electricity, labour deployment, transport of goods, buyers, flow back of sale proceeds, or any other tangible circumstance commonly required to prove clandestine manufacture and removal. The Revenue also did not examine the persons whose names appeared in the records. A charge of clandestine removal, being a serious allegation, must be established by direct, affirmative and corroborative evidence and cannot rest on assumptions or presumptions.

Conclusion: The charge of clandestine removal was not proved and the duty demand could not be sustained.

Issue (ii): Whether the appellant was entitled to the benefit of small scale industry exemption in view of its turnover.

Analysis: The annual turnover reflected in the excise return was below the threshold for availing the exemption under Notification No. 8/2003-CE dated 01.03.2003. Once the clandestine removal allegation failed, the turnover position supported the appellant's claim to the exemption for the relevant period.

Conclusion: The appellant was entitled to the small scale industry exemption on the facts found.

Final Conclusion: The impugned demand, interest and penalty were set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: A demand of clandestine removal cannot be sustained unless the Revenue proves it with concrete, corroborative and affirmative evidence; documents alone, without supporting material, are insufficient.

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