Clandestine Removal Requires Tangible Evidence; uncorroborated statements and documents cannot sustain excise demand or co-noticee penalties.

Central excise duty demand based on alleged clandestine removal failed because the Department did not produce cogent, tangible evidence such as extra raw material procurement, abnormal electricity use, labour deployment, stock discrepancies, transit interception, or duplicate invoices. Uncorroborated statements and packing slips/GRs were insufficient to prove actual clearance without duty. As the foundational allegation was not established, the consequential penalties on co-noticees under Rule 209A of the Central Excise Rules, 1944 also could not survive. Clandestine removal and derivative penal liability must rest on credible evidence, not suspicion, assumptions, or isolated unverified statements.

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Issues: (i) Whether the demand of central excise duty could be sustained on the allegation of clandestine removal of goods on the basis of packing slips and GRs; (ii) Whether the penalties imposed on the co-noticees under Rule 209A of the Central Excise Rules, 1944 could survive.

Issue (i): Whether the demand of central excise duty could be sustained on the allegation of clandestine removal of goods on the basis of packing slips and GRs.

Analysis: The allegation of clandestine removal was not supported by tangible evidence of extra procurement of raw material, higher electricity consumption, labour deployment, shortage or excess of inputs or finished goods, interception of goods in transit, or recovery of duplicate invoices. The statements relied upon were either denied later or remained uncorroborated, and the record did not establish actual clearance of goods without payment of duty. A charge of clandestine removal cannot rest on assumptions and presumptions alone.

Conclusion: The duty demand was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the penalties imposed on the co-noticees under Rule 209A of the Central Excise Rules, 1944 could survive.

Analysis: The penalties were entirely dependent on proof of receipt or dealing with goods alleged to have been clandestinely removed without payment of duty. Since the foundational allegation itself was not proved by reliable evidence, the derivative penalty under Rule 209A could not stand.

Conclusion: The penalties on the other appellants were unsustainable and were set aside in favour of the assessee.

Final Conclusion: The common order was annulled and the appellants obtained full relief because the Department failed to establish clandestine removal by credible evidence.

Ratio Decidendi: Clandestine removal and consequential penal liability must be proved by cogent, convincing and tangible evidence, and cannot be upheld on mere suspicion, assumptions, or uncorroborated statements.

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