Clandestine removal not proved on private register alone; lack of corroboration defeated the demand, penalties and interest.

Demand, penalties and interest based only on a seized private register and statements were held unsustainable where clandestine production and removal were not corroborated by evidence of extra raw material procurement, higher electricity use, sale proceeds, disposal of finished goods, or unaccounted cash. The private register alone was found insufficient to prove large-scale removal, and the explanation for differing recording periods between the private register and the statutory RG 1 register created further doubt. On these facts, clandestine removal was not established and the assessee succeeded.

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Issues: Whether the demand, penalties and interest could be sustained on the basis of the seized private register and statements, in the absence of corroborative evidence of clandestine production and removal.

Analysis: The entire case turned on a private register seized from the factory and the inference drawn therefrom regarding alleged clandestine clearances. The seized record, by itself, was held insufficient to establish such large-scale removal when there was no corroboration from evidence of procurement of additional raw materials, higher electricity consumption, sale proceeds, disposal of finished goods, or recovery of unaccounted cash. The explanation regarding different recording periods in the private register and the statutory RG 1 register was also accepted as creating doubt. In these circumstances, clandestine removal could not be proved merely on the basis of the register and statements of individuals.

Conclusion: The demand and penalties were not sustainable and the assessee succeeded.

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