Clandestine removal requires positive corroborative evidence; private records, stock shortage, and job work non-compliance were insufficient here.

A charge of clandestine removal of brass and copper goods was rejected because it was not supported by positive, corroborative evidence. Private records and patterned statements of buyers and co-accused were found insufficient without proof of cash receipts, transport arrangements, excess raw material use, abnormal power consumption, labour deployment, or actual movement of unaccounted goods. A minor stock shortage, without reliable stock-taking or linkage to clearances, also could not establish duty demand. Goods admittedly made on job work basis were not rendered dutiable merely because the prescribed procedure was not followed, where the job work nature was otherwise evident. The duty demand and penalties were set aside.

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Issues: (i) whether the demand of central excise duty and penalties for alleged clandestine manufacture and clearance of brass and copper goods was sustainable on the basis of private records and statements of buyers and co-accused; (ii) whether the allegation of clandestine clearance could be sustained on the basis of the alleged minor stock shortage; and (iii) whether duty could be demanded on goods admittedly manufactured on job work basis for want of compliance with the prescribed procedure.

Issue (i): whether the demand of central excise duty and penalties for alleged clandestine manufacture and clearance of brass and copper goods was sustainable on the basis of private records and statements of buyers and co-accused

Analysis: The demand rested mainly on private records and statements of a limited number of alleged buyers, while the alleged quantity of clandestine clearances was much larger. No corroborative evidence of cash receipts, unaccounted payments, transport arrangements, receipt of sale proceeds, excess raw material consumption, disproportionate power consumption, labour deployment, or actual clandestine movement of goods was established. The statements relied upon were found to be in a similar pattern and were treated as unreliable in the absence of supporting material. On such material, the serious charge of clandestine removal was not proved.

Conclusion: The demand of duty and the connected penalties on this basis were unsustainable and failed in favour of the assessee.

Issue (ii): whether the allegation of clandestine clearance could be sustained on the basis of the alleged minor stock shortage

Analysis: The alleged shortage was not backed by any reliable method of stock taking or weighment disclosed in the panchnama. The quantity was comparatively small and could not, by itself, establish clandestine removal. No independent investigation linked the alleged shortage to any actual unaccounted clearance.

Conclusion: The alleged stock shortage did not justify the demand and the finding went in favour of the assessee.

Issue (iii): whether duty could be demanded on goods admittedly manufactured on job work basis for want of compliance with the prescribed procedure

Analysis: The record showed that a portion of the work was undertaken on job work basis and that the principal manufacturers were identifiable. Mere non-compliance with the prescribed procedure under the relevant notification could not, by itself, convert such clearances into dutiable clandestine removals when the underlying job work nature was evident on record.

Conclusion: The duty demand on the job work clearances was not sustainable and this issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeals succeeded with consequential relief.

Ratio Decidendi: A charge of clandestine removal must be proved by positive, corroborative and tangible evidence, and cannot rest merely on private records, patterned statements, or unsubstantiated assumptions where the surrounding circumstances do not establish unaccounted production, removal, or receipt of consideration.

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