Clandestine removal demands require full factual inquiry; estimates based on one raw material and ignored defence evidence cannot stand.

Clandestine removal cannot be sustained on an incomplete factual foundation where duty demand, confiscation and penalties rest mainly on statements and an estimate drawn from consumption of a single raw material. The Tribunal noted that defence evidence on alternative raw materials, different formulations, research certificates and invoice explanations had not been properly examined, and that the adjudicating authority failed to deal with these material objections. The impugned order was set aside and the matter remanded for de novo adjudication, with liberty to the assessee to place further material.

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Issues: Whether the demand of duty, confiscation and penalties could be sustained on the basis of statements and an estimation of production derived mainly from the consumption of a single raw material, and whether the adjudicating authority failed to consider the defence evidence.

Analysis: The order under challenge treated the consumption of ordinary sulphur as the principal basis for estimating production and clandestine clearances, while the defence had produced material showing use of other raw materials, different formulations, certificates from a research institute, and explanations regarding invoices and statements. The Tribunal held that, for proving clandestine removal retrospectively, reliance on one raw material alone was insufficient where other material evidence and explanations had not been examined. It also found that the adjudicating authority had ignored relevant defence evidence and proceeded without properly dealing with the contention that the production figures and clearances could not be determined on the limited basis adopted.

Conclusion: The demand and consequential penalties could not be upheld on the existing adjudication and the matter required reconsideration after examining the full defence case.

Final Conclusion: The impugned order was set aside and the matter was remanded for de novo adjudication with liberty to the assessee to place further material.

Ratio Decidendi: A finding of clandestine removal cannot be sustained on an incomplete factual foundation or by relying on a single raw-material-based estimate while ignoring material defence evidence and alternative explanations.

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