Clandestine removal allegations under the compounded levy scheme failed for want of reliable evidence, setting aside duty, confiscation, and penalties.

Under the compounded levy scheme, duty liability was not tied to actual production or clearances, and the allegation of clandestine removal of fabrics without stentering required reliable supporting evidence. The charge failed because the record, including test results, did not substantiate the alleged removal without stentering. As the principal allegation of clandestine removal was not proved, the consequential demand of duty, confiscation, and penalties founded on that allegation could not be sustained and were set aside.

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Issues: Whether, under the compounded levy scheme, the allegation of clandestine removal of fabrics without stentering was proved so as to sustain the demand of duty, confiscation, and penalties.

Analysis: The duty liability under the compounded levy scheme was not dependent upon actual production or clearances. The allegation that the fabrics were removed without stentering was not supported by reliable evidence or test results. In the absence of substantiation of the primary charge, the finding of clandestine removal could not be sustained. Once the principal allegation failed, the confiscation and penalties founded on that allegation also could not stand.

Conclusion: The demand, confiscation, and penalties were set aside, and the assessee succeeded on the substantive challenge.

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