Clandestine removal allegations require corroborative evidence; private records alone cannot sustain duty demand, except admitted Modvat credit.

Allegations of clandestine manufacture and removal cannot be sustained solely on private records and presumptions; corroborative evidence such as excess electricity use, unaccounted raw material procurement, identifiable buyers, or cash realisation is required. In the absence of such supporting material and where the authors of private records were not cross-examined, duty, penalty, fine and interest based on clandestine clearances were set aside. The admitted Modvat credit on inputs was separately confirmed because it was not in dispute.

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Issues: (i) Whether the demand of duty, penalty, fine and interest for alleged clandestine production and removal could be sustained solely on the basis of private records without corroborative evidence. (ii) Whether the admitted Modvat credit of Rs. 46,893 on inputs was liable to be confirmed.

Issue (i): Whether the demand of duty, penalty, fine and interest for alleged clandestine production and removal could be sustained solely on the basis of private records without corroborative evidence.

Analysis: The alleged clandestine clearances were sought to be proved from private documents and assumptions drawn from them. The authors of the private records were not cross-examined, and the record disclosed no corroboration in the form of excess consumption of electricity, unaccounted procurement of raw materials, proof of buyers, or evidence of unaccounted cash realization. The finding of quantity and removal was therefore based on presumption rather than proof.

Conclusion: The demand of duty and the connected penalties, fine and interest, other than the admitted Modvat amount, were not sustainable and were set aside in favour of the assessee.

Issue (ii): Whether the admitted Modvat credit of Rs. 46,893 on inputs was liable to be confirmed.

Analysis: The amount relating to Modvat on inputs was accepted by the assessee and did not require adjudication on dispute of fact or law.

Conclusion: The confirmation of Rs. 46,893 was upheld against the assessee.

Final Conclusion: The appeals succeeded substantially, with all clandestine removal-based demands and consequential penalties/fine/interesta set aside, while only the admitted Modvat demand was sustained.

Ratio Decidendi: Allegations of clandestine manufacture and removal cannot be sustained merely on private records and presumptions unless supported by corroborative evidence establishing actual production, procurement, removal, and realization.

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