Clandestine removal demands need corroborated proof; unproved excess clearance and duty liability cannot sustain penalties or confiscation.

Alleged differential excise duty on granite slabs cleared by a 100% EOU to the Domestic Tariff Area was treated as unsustainable where there was no evidence of extra realisation or permission-based excess sale. A demand resting on a single unexamined document and stock discrepancies was also rejected because clandestine removal requires corroborated proof, and an EOU was not required to maintain RG 1 for that comparison. Once no excess removal or duty liability was established, the consequential penalties, confiscation and redemption fine could not survive.

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Issues: (i) Whether the duty demand based on alleged clearance of excess gross area of granite slabs to the Domestic Tariff Area was sustainable in the absence of evidence of extra realisation or permission for such sale. (ii) Whether the demand founded on a single unexamined document and alleged stock discrepancies established clandestine removal. (iii) Whether the penalties, confiscation and redemption fine could survive once the duty demand failed.

Issue (i): Whether the duty demand based on alleged clearance of excess gross area of granite slabs to the Domestic Tariff Area was sustainable in the absence of evidence of extra realisation or permission for such sale.

Analysis: The demand was attempted under the excise levy applicable to goods cleared into the Domestic Tariff Area from a 100% EOU. The reasoning accepted that, in the trade, invoicing and payment were linked to the usable or salvageable area and that the gross area shown in internal records did not by itself prove clearance of additional goods. Since the Department produced no evidence of additional consideration having been received for any alleged excess quantity, the actual realisation already made was treated as consideration for the total slab area delivered. In that situation, no separate differential duty could be sustained on the supposed gross area.

Conclusion: The duty demand on this basis was not sustainable and was against the Revenue.

Issue (ii): Whether the demand founded on a single unexamined document and alleged stock discrepancies established clandestine removal.

Analysis: The alleged demand based on the local despatch document was rejected because clandestine removal cannot rest on one uncorroborated paper, particularly when its author was not examined and no independent evidence linked the entries to undisclosed removals. As to the stock shortage and excesses, the Tribunal noted that an EOU was not required to maintain RG 1 under the applicable rules, so comparisons with that register were not a reliable legal basis. The alleged shortage was also not proved beyond mere estimation, and the physical stock verification material did not support the Collector's conclusion.

Conclusion: The allegations of clandestine removal and the corresponding duty demand were not proved and were against the Revenue.

Issue (iii): Whether the penalties, confiscation and redemption fine could survive once the duty demand failed.

Analysis: Once the Tribunal found that no excess removals, shortages, or duty liability were established, there remained no foundation for invoking the penal provisions or sustaining confiscation. The redemption fine and penalties were consequential to the failed demand and could not stand independently.

Conclusion: The penalties, confiscation and redemption fine were unsustainable and were against the Revenue.

Final Conclusion: The impugned order was set aside because the duty demands, alleged shortages and excess removals were not proved, and the consequential penalties and confiscation also fell.

Ratio Decidendi: Alleged clandestine removal and differential excise duty cannot be sustained without affirmative evidence of extra realisation or corroborated proof of undisclosed clearance, and consequential penalties or confiscation cannot survive where the foundational demand fails.

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