Clandestine removal demands correlated evidence of manufacture and clearance; dealer statements alone cannot justify duty and penalty.

Allegations of clandestine manufacture and removal of excisable goods must be proved by cogent, correlated evidence of actual production and clearance; dealer and wholesaler records or statements alone are only corroborative and cannot sustain duty and penalty without linkage to the manufacturer's own production, raw material, electricity, and clearance records. Where the adjudication did not properly examine the appellant's records or answer the objections raised, the duty confirmation and penalty required reconsideration. The orders were set aside and the matter was remanded for de novo adjudication after an effective hearing.

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Issues: (i) Whether the duty demand for alleged clandestine manufacture and removal of excisable goods could be sustained mainly on the basis of dealer and wholesaler records and statements without adequate correlation to the manufacturer's own production, raw material, electricity and clearance records; (ii) Whether the penalty and other findings required reconsideration on de novo adjudication.

Issue (i): Whether the duty demand for alleged clandestine manufacture and removal of excisable goods could be sustained mainly on the basis of dealer and wholesaler records and statements without adequate correlation to the manufacturer's own production, raw material, electricity and clearance records.

Analysis: For clandestine removal, the department must establish actual manufacture and surreptitious clearance by reliable evidence. The records relied upon by the authorities were principally those of the dealer and wholesaler, while the appellant's production chart, diary, and other relevant registers were not properly correlated with the alleged excess clearances. In a case involving franchise manufacture of aerated drinks, the essential inputs and manufacturing indicators, such as essence, sugar, crown corks and CO2, assumed importance, but no sufficient linkage was drawn here between such inputs and the alleged removals. The findings were also not supported by a proper discussion of the appellant's replies and records.

Conclusion: The demand could not be finally sustained on the material as considered, and the matter required fresh adjudication.

Issue (ii): Whether the penalty and other findings required reconsideration on de novo adjudication.

Analysis: The adjudication suffered from infirmity because the authorities did not adequately examine the appellant's records or record findings on the objections raised. In such a situation, the correctness of the penalty under Rule 209A and the duty confirmation had to be re-examined together by the original authority after granting an effective opportunity of hearing and considering both sides' evidence.

Conclusion: The impugned orders were set aside and the matter was remanded for de novo consideration, including reconsideration of the penalty.

Final Conclusion: The adjudication was found to be incomplete and unsupported by sufficient correlated evidence, so the case was sent back for fresh decision on the merits after hearing the appellant.

Ratio Decidendi: Allegations of clandestine removal must be proved by cogent, correlated evidence of manufacture and clearance, and dealer statements by themselves are only corroborative and cannot be the sole basis for confirming duty and penalty.

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