Clandestine removal demands need independent corroboration; unverified transport documents and unproven suppression cannot justify extended limitation.

Central excise duty demands based on alleged clandestine removal require independent corroboration: seized transport documents alone are insufficient unless verified from the alleged consignors and consignees and supported by other reliable evidence. Where affidavits, certificates and bank records are produced, and no inquiry is made from the relevant parties or independent witnesses, allegations of clandestine clearance rest on presumption rather than proof. The extended limitation period under the proviso to Section 11A applies only when suppression or wilful misstatement is satisfactorily established; absent such factual basis, invocation of the extended period is invalid and the demand is time-barred.

---

---

Issues: (i) Whether the demand of excise duty and the findings of clandestine clearance could be sustained on the basis of seized transport documents without verification from the alleged consignors and consignees and without adequate corroboration; (ii) Whether the extended period of limitation under the proviso to Section 11A of the Central Excise Act was validly invoked on the allegation of suppression and misstatement.

Issue (i): Whether the demand of excise duty and the findings of clandestine clearance could be sustained on the basis of seized transport documents without verification from the alleged consignors and consignees and without adequate corroboration.

Analysis: The demand was founded mainly on seized goods receipts and presumptions regarding their genuineness and linkage to the petitioners' factory. The Court found that no inquiry had been made from the alleged consignors and consignees, although the petitioners had produced affidavits, certificates, and bank records indicating dispatch and payment through bank drafts. The Tribunal had also proceeded without sufficient corroboration from labourers, workers, or other independent evidence. In these circumstances, the allegations of clandestine removal were held to rest on surmise and presumption rather than dependable proof.

Conclusion: The finding of clandestine clearance was not sustainable, and the demand could not stand against the assessee.

Issue (ii): Whether the extended period of limitation under the proviso to Section 11A of the Central Excise Act was validly invoked on the allegation of suppression and misstatement.

Analysis: The show cause notice invoked the extended period on the basis of alleged suppression, but the Court found that the factual basis for such suppression was not established. The petitioners had explained the nature of the equipment and the trading unit, and the record did not justify the conclusion that there was a deliberate failure to intimate the department or any concealment warranting the extended period. The Tribunal's limitation finding was therefore held to be unsupported by the record.

Conclusion: The invocation of the extended period of limitation was invalid, and the demand was time-barred.

Final Conclusion: The impugned order was set aside, the writ petition was allowed, and the petitioners were held entitled to refund of the amount deposited in compliance with the pre-deposit requirement.

Ratio Decidendi: A demand of central excise duty based on clandestine removal cannot be sustained without independent corroboration and proper verification of the alleged transport documents, and the extended limitation period under Section 11A applies only when suppression or wilful misstatement is satisfactorily established.

---