Clandestine removal requires corroborated evidence; inflated wastage alone cannot sustain duty, penalty, or interest demands.

Clandestine removal of quartz clock movements was alleged on the basis of inflated wastage of enamelled copper wire and plastic scrap, but the demand was not supported by reliable corroborative evidence. The Tribunal noted that comparisons with other units and competitor statements were insufficient without examining material manufacturing factors such as wire breakage, technology changes, imported inputs, and correlation with Modvat records. It also treated the denial of cross-examination, unconvincing allegations about fictitious scrap buyers, and evidence of genuine cheque-based sales as weakening the department's case. The plastic scrap explanation was supported by the job worker's statement, and an isolated stock incident did not prove a continuing pattern. Duty, penalties, and interest could not be sustained.

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Issues: Whether the department had established clandestine manufacture and removal of quartz clock movements on the basis of alleged inflated wastage of enamelled copper wire and plastic scrap, unsupported by reliable corroborative evidence.

Analysis: The demand was founded mainly on comparisons with other units, statements of competitors, and an inference that the assessee's wastage percentages were abnormally high. The Tribunal held that the department ought to have examined all relevant manufacturing factors, including the nature of the thin copper wire, breakage during winding, technology improvements, imported raw materials, and correlation with other inputs and Modvat records. It also found that the witnesses relied on by the department were not offered for cross-examination and that the evidence regarding allegedly fictitious scrap buyers was not convincing in light of the material showing substantial sales to a real purchaser through cheque payments. The Tribunal further accepted that the plastic scrap explanation was supported by the job worker's statement and that the isolated recovery and stock-verification incident did not by itself prove a continuing pattern of malpractice.

Conclusion: The allegation of inflated wastage and clandestine removal was not proved, and the duty demand, penalties, and interest could not be sustained.

Ratio Decidendi: A finding of clandestine removal cannot rest on conjecture or comparison alone and must be supported by reliable, corroborated evidence covering all material manufacturing and accounting factors.

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