Clandestine removal demands need corroborative evidence; private registers alone were insufficient, and the matter was remanded for fresh adjudication.

Private registers and employee statements, without corroboration from wrapping registers, RG 1 entries, invoices, customers' affidavits, or test results, were held insufficient to conclusively prove clandestine removal of higher-count cotton yarn. The evidentiary record included material supporting the assessee's declared clearances, and the departmental test results were noted to favour the assessee, so the duty demand could not be sustained on the existing material. The order was also found deficient for not properly dealing with defence evidence and natural justice safeguards, including cross-examination. The confirmed demands and penalties were therefore set aside and the matter remanded for de novo adjudication.

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Issues: (i) Whether a demand of duty for alleged clearances of higher-count cotton yarn could be sustained on the basis of private registers and statements alone without proper consideration of wrapping registers, RG 1 entries, invoices, customers' affidavits, and test results; (ii) Whether the impugned order required to be set aside and the matter remanded for de novo adjudication.

Issue (i): Whether a demand of duty for alleged clearances of higher-count cotton yarn could be sustained on the basis of private registers and statements alone without proper consideration of wrapping registers, RG 1 entries, invoices, customers' affidavits, and test results.

Analysis: The demand rested substantially on private records and statements of employees, but the record also contained wrapping registers, RG 1 entries, invoices and customers' affidavits supporting the assessee's case that the final product cleared matched the declared counts. The departmental test results for the relevant periods were noted to be in the assessee's favour, and the higher-count goods seized from the factory were not shown to have been cleared or sold as such. Private registers, by themselves, were held insufficient to conclusively prove clandestine removal without corroborative evidence of actual clearance and receipt of higher sale proceeds. The evidence favourable to the assessee had been brushed aside without adequate reasons.

Conclusion: The duty demand could not be conclusively sustained on the existing material, and the assessee's challenge to the evidentiary basis succeeded to that extent.

Issue (ii): Whether the impugned order required to be set aside and the matter remanded for de novo adjudication.

Analysis: The order was found to be deficient in that it did not properly examine the crucial defence materials, did not give reasoned findings on rejection of the wrapping registers, invoices and affidavits, and did not permit full consideration of the assessee's request for cross-examination and other natural justice safeguards. Since the department had not appealed against the portion of the order dropping part of the demand, the remand was confined to the duty and penalties sustained by the Commissioner.

Conclusion: The impugned order was set aside to the extent of the confirmed demands and the matter was remanded for de novo consideration.

Final Conclusion: The assessee obtained relief by way of remand after the Tribunal found inadequate appreciation of the evidence and insufficient proof of clandestine clearance.

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