Undervaluation demands need corroborative evidence; statements alone cannot prove clandestine cash receipt, and penalty falls with the demand.

A demand alleging undervaluation and clandestine receipt of extra consideration cannot be sustained on statements alone; corroborative documentary or other material evidence is required to prove the charge. Here, the Revenue failed to produce supporting records, so the allegation remained based on suspicion rather than proof. The finding that the demand was not established was accepted as legal and proper, and the consequential penalty also failed once the duty demand was set aside.

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Issues: Whether the demand for undervaluation and clandestine receipt of extra cash was sustainable in the absence of corroborative evidence, and whether the penalty could survive once the duty demand failed.

Analysis: The Revenue did not produce documentary or other material evidence to support the allegation that extra amounts were received over and above the invoice value. The case rested substantially on statements, but such statements, without supporting records or other corroboration, were held insufficient to discharge the burden of proof. The finding of the Commissioner (Appeals) that the demand was based only on suspicion and not on proved evidence was accepted as legal and proper. Since the demand itself was unsupported, the consequential penalty could not stand.

Conclusion: The allegation of undervaluation and receipt of cash was not proved, and the demand and penalty were rightly set aside in favour of the assessee.

Ratio Decidendi: A demand of undervaluation or clandestine receipt of consideration cannot be sustained on statements alone and must be supported by corroborative material evidence; suspicion, however grave, cannot replace proof.

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