Clandestine removal demands need admissible electronic evidence, tested statements and independent corroboration before liability can stand.

Computer printouts and electronic records could not be treated as reliable evidence without the prescribed certificate and proof of authenticity, so the department's electronic material failed as proof of demand. Statements recorded during investigation were also unusable because the statutory procedure for examination and cross-examination was not followed once they were disputed. Clandestine manufacture and clearance was not established, since private chits, printouts and alleged shortages were unsupported by corroboration such as raw-material procurement, transport records, power use, cash trail or sale proceeds. The duty demand, interest and penalties therefore could not survive.

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Issues: (i) whether the computer printouts and electronic records relied upon by the department were admissible in evidence without compliance with the statutory conditions; (ii) whether the statements recorded during investigation could be relied upon without examination-in-chief and cross-examination in terms of the statutory procedure; (iii) whether the charge of clandestine manufacture and clearance was established on the basis of the seized chits, printouts and alleged shortages.

Issue (i): Whether the computer printouts and electronic records relied upon by the department were admissible in evidence without compliance with the statutory conditions.

Analysis: The electronic material was the foundation of the demand, but the conditions governing admissibility of computer printouts were not shown to have been satisfied. The devices and printouts were not supported by the required certificate, and the record did not establish regular use of the computer system for the relevant business purposes or compliance with the prescribed safeguards for authenticity and source verification. In the absence of such compliance, the evidentiary value of the printouts stood displaced.

Conclusion: The electronic printouts were not admissible as reliable evidence against the assessee.

Issue (ii): Whether the statements recorded during investigation could be relied upon without examination-in-chief and cross-examination in terms of the statutory procedure.

Analysis: The demand also rested on statements of directors, employees, suppliers and buyers. Those statements were not tested by the procedure required for reliance on such evidence, and the witnesses were not examined in the manner necessary before the adjudicating authority. Once the statements were disputed, they could not be treated as substantive proof without following the mandatory evidentiary safeguards and affording cross-examination where required.

Conclusion: The statements were not legally dependable for sustaining the demand.

Issue (iii): Whether the charge of clandestine manufacture and clearance was established on the basis of the seized chits, printouts and alleged shortages.

Analysis: Clandestine removal is a serious charge and must be proved by affirmative, cogent and corroborative evidence. Here, the record did not disclose supporting material such as proof of procurement of raw materials, transport documents, excess electricity consumption, cash flow back, unaccounted sale proceeds, or other independent corroboration. The private chits and alleged shortage of billets, by themselves, were insufficient to sustain the allegation.

Conclusion: The charge of clandestine manufacture and clearance was not established.

Final Conclusion: The duty demand, interest and penalties could not survive for want of admissible and corroborated evidence, and the assessee succeeded in the appeals.

Ratio Decidendi: A demand for clandestine removal cannot be sustained on uncorroborated private records, unauthenticated computer printouts or untested statements; strict compliance with the statutory rules on electronic evidence and witness examination is essential, and affirmative corroboration is required to prove evasion.

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