Clandestine removal requires reliable corroboration; ambiguous records and promptly retracted statements were insufficient to sustain duty demand.
An allegation of clandestine manufacture and removal of yarn must be proved by reliable, corroborated evidence meeting the requisite standard of probability. The creel register was held insufficient on its own because its entries and abbreviations were ambiguous and not shown to exclusively record non-duty-paid yarn movements. Promptly retracted statements also lost evidentiary value and could not safely serve as corroboration. As the investigation remained incomplete on inputs, purchasers, and surrounding circumstances, the department failed to discharge the burden of proof. The demand and penalties could not therefore be sustained.
Issues: (i) Whether the creel register and the accompanying entries established clandestine manufacture and removal of yarn without payment of duty; (ii) whether the statements relied upon by the department, having been retracted the next day, could be treated as reliable corroboration; (iii) whether the department had discharged the evidentiary burden required to sustain the demand and penalties.
Issue (i): Whether the creel register and the accompanying entries established clandestine manufacture and removal of yarn without payment of duty.
Analysis: The register contained multiple columns and abbreviations that could relate to different processes, including twisting and drawing. The entries were not shown to be exclusively referable to non-duty-paid PFY drawn from POY, and the register did not, by itself, permit segregation of lawful and alleged unlawful activity with sufficient certainty. The evidence also did not establish to the required degree that the register was maintained by or under the manufacturer's authority in the manner asserted by the department.
Conclusion: The register was not sufficient, by itself, to prove clandestine removal.
Issue (ii): Whether the statements relied upon by the department, having been retracted the next day, could be treated as reliable corroboration.
Analysis: The retractions were made promptly, without delay, and there is no legal requirement that a retraction must be filed before a superior officer rather than the officer who recorded the statement. In the circumstances, the retractions could not be disregarded merely on that ground, and the statements therefore lost their evidentiary force as dependable corroboration.
Conclusion: The retracted statements could not safely be relied upon as corroborative evidence against the assessee.
Issue (iii): Whether the department had discharged the evidentiary burden required to sustain the demand and penalties.
Analysis: The investigation remained incomplete, particularly as regards the source of inputs, the identity and confirmation of alleged purchasers, and other surrounding circumstances necessary to support an allegation of clandestine manufacture and removal. On the record as a whole, the evidence fell short of the degree of probability required to sustain the charge.
Conclusion: The department failed to discharge the burden of proving clandestine removal.
Final Conclusion: The demand and penalties could not be sustained, and the appeals succeeded with consequential relief.
Ratio Decidendi: An allegation of clandestine manufacture and removal must be proved by reliable, corroborated evidence meeting the requisite standard of probability; ambiguous records and promptly retracted statements, without adequate independent investigation, are insufficient to sustain duty demand and penalties.