Clandestine removal requires positive evidence; inflated declarations to another authority alone cannot sustain duty demand or penalty.

Inflated clearance figures shown in annual returns filed with the District Industries Centre, without positive evidence of actual manufacture and removal, were held insufficient to sustain a charge of clandestine removal. The Tribunal stated that clandestine removal is a serious allegation and must be proved by the Revenue through positive evidence; later rectification of the declarations further weakened the case. On that basis, the duty demand and penalty were set aside, and the assessee obtained consequential relief.

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Issues: Whether duty demand and penalty could be sustained on the basis of inflated clearance figures shown in annual returns filed with the District Industries Centre, without other positive evidence of clandestine manufacture and removal.

Analysis: The demand was founded entirely on annual returns filed with the District Industries Centre. The Tribunal held that clandestine removal is a serious allegation and must be established by the Revenue through positive evidence. Mere inflated declarations made to another authority, especially when later rectified, are insufficient to prove clandestine manufacture and removal or to justify duty demand.

Conclusion: The finding of clandestine manufacture and removal was not sustainable, and the duty demand and penalty were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned order was annulled with consequential relief.

Ratio Decidendi: A charge of clandestine removal cannot be upheld merely on the basis of inflated figures declared to another department or authority unless supported by positive evidence establishing actual clandestine manufacture and clearance.

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