Balance-sheet discrepancies alone cannot prove clandestine removal or justify extended limitation without corroborative evidence.

Balance-sheet discrepancies with RT-12 returns, without corroborative evidence such as unaccounted inputs, market enquiries, or seizure of goods, were held insufficient to prove clandestine manufacture or removal. The duty demand therefore failed on merits. The balance sheets were public documents already supplied to the Revenue, so no suppression of material facts was established and the extended limitation period could not be invoked. The demand for the earlier period was accordingly time-barred, and the duty demand and penalty were set aside with consequential relief.

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Issues: (i) Whether the demand of duty could be sustained on the basis of discrepancies between the balance sheets and RT-12 returns as proof of clandestine production and removal; and (ii) whether the extended period of limitation could be invoked on the footing that the balance sheets showed suppression of material facts.

Issue (i): Whether the demand of duty could be sustained on the basis of discrepancies between the balance sheets and RT-12 returns as proof of clandestine production and removal.

Analysis: The only basis for the demand was the alleged mismatch between production reflected in the balance sheets and that shown in the RT-12 returns. The record did not disclose any corroborative evidence of clandestine clearance, such as market inquiries, proof of unaccounted inputs, or seizure of unaccounted goods. The discrepancies were explained as arising from errors in compilation and from variations in pack sizes and bottle capacities. In such circumstances, balance-sheet figures by themselves were not treated as conclusive proof of clandestine manufacture or removal.

Conclusion: The demand could not be sustained on merits.

Issue (ii): Whether the extended period of limitation could be invoked on the footing that the balance sheets showed suppression of material facts.

Analysis: The balance sheets were public documents and had been supplied to the Revenue. On the facts, there was no suppression of material facts attributable to the assessee. Since the demand for the earlier period was raised after the normal limitation period, and the precondition for invoking the extended period was not satisfied, the demand was held to be time-barred.

Conclusion: The extended period could not be invoked and the demand was time-barred in favour of the assessee.

Final Conclusion: The duty demand and penalty were set aside, and the appeal succeeded with consequential relief.

Ratio Decidendi: Allegations of clandestine removal and invocation of the extended limitation period cannot rest solely on balance-sheet discrepancies absent corroborative evidence of suppression, clandestine clearance, or other incriminating material.

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