Clandestine removal demands require independent corroboration; unsupported invoices and statements failed, while input shortage and confiscation partly survived.
Clandestine removal must be proved by positive, independent and corroborative evidence; invoices, loose papers and untested statements alone are insufficient. On that basis, the duty demand based on 143 invoices, outside godown materials, weighment slips and loose slips was set aside where corroboration was lacking, while the unreconciled shortage of inputs sustained the duty demand. Excess finished goods not entered in statutory records remained liable to confiscation, and the redemption fine and company penalty were reduced with the other penalties set aside.
Issues: (i) Whether the demand of duty based on 143 invoices and accompanying statements alleging clandestine clearance was sustainable; (ii) whether the duty demand relating to goods found in the outside godown, confiscation of excess finished goods, shortage of inputs, and other alleged clearances could be upheld; (iii) whether the penalties and redemption fine required interference.
Issue (i): Whether the demand of duty based on 143 invoices and accompanying statements alleging clandestine clearance was sustainable.
Analysis: The demand rested mainly on invoices and statements of drivers and employees. The invoices were not corroborated by statements of buyers, transporters, payment trail, or evidence of procurement of raw materials and corresponding electricity consumption. The statements of the drivers remained uncorroborated and were also not tested by cross-examination. Clandestine removal cannot be sustained on surmises, assumptions, or unverified statements alone.
Conclusion: The demand on this count was set aside in favour of the assessee.
Issue (ii): Whether the duty demand relating to goods found in the outside godown, confiscation of excess finished goods, shortage of inputs, and other alleged clearances could be upheld.
Analysis: The demand relating to goods in the outside godown was not supported by rebuttal of the appellants' evidence of market purchases and cheque payments. The demand based on weighment slips and loose slips was unsupported by independent corroboration. The shortage of inputs, however, was not satisfactorily explained and remained unreconciled. The excess finished goods found in the factory were not entered in the statutory records and were therefore liable to confiscation.
Conclusion: The demands relating to the outside godown, weighment slips, loose slips, and similar alleged clearances were set aside, while the duty on shortage of inputs was upheld and confiscation of excess finished goods was sustained.
Issue (iii): Whether the penalties and redemption fine required interference.
Analysis: As most duty demands failed, the penalties and redemption fine required corresponding modification. The redemption fine imposed on the excess finished goods was considered excessive and needed reduction. Penalties on the directors had no surviving basis once the principal allegations failed.
Conclusion: The redemption fine was reduced, the penalty on the company was reduced, and the penalties on the other appellants were set aside.
Final Conclusion: The appeals succeeded substantially, with only the duty on shortage of inputs and the confiscation of excess finished goods surviving, along with a reduced redemption fine and reduced company penalty.
Ratio Decidendi: A charge of clandestine manufacture and removal must be proved by positive, independent and corroborative evidence, and untested statements or documents alone cannot sustain duty demands.