Clandestine removal demands require corroborative evidence; private notes and untested statements cannot sustain duty or confiscation.

A charge of clandestine manufacture and removal of Tar Catchers cannot be sustained on private note books and investigation statements alone where the record lacks positive corroboration such as raw material procurement, transport evidence, buyer confirmations, production records, or cash trail. Statements used against the assessee also require compliance with Section 9D of the Central Excise Act, 1944, including opportunity for cross-examination. Mere non-entry of goods in statutory records does not by itself justify confiscation when the goods are found within the factory and there is no independent evidence of intended clandestine clearance. On these principles, the duty demand, interest, penalties, and confiscation were held unsustainable.

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Issues: (i) whether the demand of central excise duty, interest and penalties for alleged clandestine manufacture and removal of Tar Catchers could be sustained on the basis of private note books and statements; (ii) whether Tar Catchers found in the factory premises and not entered in statutory records were liable to confiscation.

Issue (i): whether the demand of central excise duty, interest and penalties for alleged clandestine manufacture and removal of Tar Catchers could be sustained on the basis of private note books and statements.

Analysis: The note books did not clearly establish actual sales or clandestine clearances, and the revenue's case suffered from serious evidentiary gaps. Only a few alleged buyers were examined, while a large number of persons whose names appeared in the note books filed affidavits denying any purchase. The adjudication also rested substantially on statements recorded during investigation, but the procedure under Section 9D of the Central Excise Act, 1944 was not followed and cross-examination was denied. In the absence of positive and tangible corroborative evidence such as procurement of raw materials, transport of goods, buyers' confirmations, production evidence, or cash trail, the allegation of clandestine removal was not proved.

Conclusion: The demand, interest and penalties were not sustainable and were set aside in favour of the assessee.

Issue (ii): whether Tar Catchers found in the factory premises and not entered in statutory records were liable to confiscation.

Analysis: Mere non-entry in RG-1 or similar records, by itself, does not establish liability to confiscation when the goods are found within the factory and there is no independent evidence of intended clandestine removal. The explanation that the goods remained within the factory premises was not displaced by contrary evidence, and the record did not show any attempt to remove the goods without payment of duty. On the settled legal position, confiscation could not be sustained.

Conclusion: The confiscation of the goods was set aside in favour of the assessee.

Final Conclusion: The impugned orders could not be sustained, and the appeals succeeded with consequential reliefs.

Ratio Decidendi: A charge of clandestine manufacture and removal must be proved by positive and corroborative evidence, and statements relied upon by the department cannot sustain the demand unless the statutory procedure for their admission is followed; mere private notes or non-entry in statutory records, without proof of intended clandestine clearance, do not justify duty demand or confiscation.

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