Clandestine removal must be proved by corroborated evidence; inadmissible electronic records and unverified statements cannot sustain duty or penalties.

Allegations of clandestine manufacture and removal must be proved by reliable, corroborated evidence; here, the record showed separate registration of sister concerns, ER-1 compliance, construction of the new unit, and only trial production after shifting of packing machinery, so the duty demand was not sustainable except for the amount already paid on seized goods. Computer printouts from seized CPUs were inadmissible without statutory compliance, and uncorroborated or retracted statements could not sustain the demand or findings. As the principal allegation failed, the redemption fine and penalties also could not survive, while appropriation of the duty already paid was upheld.

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Issues: (i) Whether the demand of central excise duty for alleged clandestine manufacture and removal of detergent cake and detergent powder was sustainable on the evidence relied upon; (ii) whether the computer printouts and witness statements could be treated as admissible and reliable evidence in the absence of compliance with the statutory requirements; (iii) whether the redemption fine and penalties imposed on the goods and on the noticees could survive.

Issue (i): Whether the demand of central excise duty for alleged clandestine manufacture and removal of detergent cake and detergent powder was sustainable on the evidence relied upon.

Analysis: The material on record showed that the sister concerns were separately registered under central excise and were filing ER-1 returns and paying duty. The new unit was under construction, the packing machines were shifted only in March 2011, and trial production had begun around that time. The allegation of clandestine removal was not supported by reliable proof of unaccounted raw material consumption, excess production, transport, receipt of sale proceeds, or any other corroborative evidence sufficient to establish removal beyond doubt.

Conclusion: The duty demand, except for the amount already paid on the seized goods, was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the computer printouts and witness statements could be treated as admissible and reliable evidence in the absence of compliance with the statutory requirements.

Analysis: The computer printouts taken from the seized CPUs were not accompanied by the mandatory compliance required for admissibility of electronic records. The statements recorded during investigation, including retracted statements, were not independently corroborated and the witnesses were not examined in the manner required for their use in adjudication. In these circumstances, the documentary and oral material relied upon by the department could not be accepted as conclusive proof of clandestine manufacture and removal.

Conclusion: The computer printouts and uncorroborated statements could not be relied upon to sustain the demand and related findings.

Issue (iii): Whether the redemption fine and penalties imposed on the goods and on the noticees could survive.

Analysis: Since the main allegation of clandestine removal was not proved, the confiscation-related consequences and personal penalties based on that allegation also could not stand. The amount of duty already paid on the seized goods was, however, upheld as appropriated.

Conclusion: The redemption fine and penalties were set aside, while the appropriation of the duty already paid was sustained.

Final Conclusion: The appeals succeeded substantially, with the impugned duty demand and penal consequences quashed, subject only to the sustained appropriation of duty already paid on the seized goods.

Ratio Decidendi: Allegations of clandestine removal must be proved by reliable and corroborated evidence, and computer-generated records or recorded statements cannot by themselves sustain duty and penalty demands without statutory compliance and independent corroboration.

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