Clandestine removal demands credible corroboration: Delhi HC upheld deletion of excise duty and penalties for lack of reliable evidence.

Clandestine removal and undervaluation in excise proceedings must be supported by credible, corroborated and tangible evidence, even though adjudication applies the civil standard of preponderance of probabilities. The Delhi HC upheld the Tribunal's majority view because the Revenue relied mainly on retracted statements, loose sheets, Hisaba books and Kachcha challans, without examining the authors or proving reliable linkage to the assessees. It also found no adequate proof of raw material procurement, actual clandestine manufacture or transport, excess power consumption, labour deployment, buyers, sale proceeds, or other corroborative circumstances. The duty demand and penalties were therefore not sustained.

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Issues: Whether the Revenue had adduced cogent and corroborated evidence to sustain the findings of clandestine removal and undervaluation, and whether the CESTAT majority order deleting the demand and penalties called for interference.

Analysis: The appeal arose from a challenge to the Tribunal's majority view which had set aside the duty demand and penalties on the ground that the Revenue's case rested principally on retracted statements, loose sheets, Hisaba books and Kachcha challans whose authors were not examined and whose recovery and linkage to the assessees were not proved with reliable material. The Court reiterated that, although adjudication proceedings are governed by the civil standard of preponderance of probabilities, the conclusions must still rest on logical and credible evidence and cannot be founded on suspicion, assumptions or presumption. It accepted the Tribunal's reasoning that there was no adequate proof of procurement of major raw materials, no verified evidence of actual clandestine manufacture or transport, no reliable proof of excess power consumption, labour deployment, buyers, sale proceeds, or other corroborative circumstances necessary to establish the charge.

Conclusion: The Revenue failed to establish clandestine removal and undervaluation with tangible and corroborative evidence, and the majority order of the Tribunal did not warrant interference.

Ratio Decidendi: A charge of clandestine removal in excise matters must be proved by credible, corroborated and tangible evidence, and cannot be sustained on retracted statements, unverified documents, or mere assumptions and presumptions.

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