Clandestine removal requires corroborated evidence; unverified notebook entries and electricity use alone cannot sustain duty demand.

Clandestine removal cannot be sustained on uncorroborated notebook entries recovered from a third party, unsupported statements, or electricity consumption figures alone; reliable independent evidence of manufacture and removal is required. The notebook entries did not clearly identify the goods or transactions, the alleged writer was not examined, and no corroboration came from transporters, purchasers, raw material suppliers or other independent sources. On the SSI exemption issue, the audited accounts were relied on to show that aggregate clearances did not cross the threshold under Notification No. 8/2003-CE. The duty demand, interest and personal penalties were therefore set aside.

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Issues: Whether the demand of duty, interest and personal penalties could be sustained on the basis of the notebook recovered from a third party, statements recorded during investigation and electricity consumption, and whether the assessee had crossed the SSI exemption threshold under Notification No. 8/2003-CE.

Analysis: The material relied upon by the Revenue consisted mainly of two pages of a notebook recovered from the custody of a supervisor, but those entries did not, by themselves, identify the goods, the parties or the nature of the transactions with sufficient clarity. The person from whose possession the notebook was recovered stated that the entries were not written by him, and no further investigation was made from the alleged writer or the raw material suppliers. There was also no corroboration from transporters, purchasers or other independent evidence of removal of finished goods. Electricity consumption figures, without supporting investigation or verification, were held insufficient to prove manufacture and clandestine clearance. The assessee's audited accounts were also relied upon to show that the aggregate clearances did not cross the SSI exemption limit.

Conclusion: The duty demand and penalties were not sustainable, as clandestine removal was not proved by credible and corroborated evidence and the allegation of crossing the SSI exemption threshold was not established.

Final Conclusion: The impugned orders were set aside and the appeals succeeded with consequential relief.

Ratio Decidendi: Allegations of clandestine removal must be proved by reliable, corroborative and independent evidence, and unverified notebook entries or electricity consumption alone are insufficient to sustain duty demand.

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