Clandestine removal demands need corroborative evidence; theoretical calculations alone cannot sustain duty, confiscation, penalties, or extended limitation.

Clandestine manufacture and removal of PTY cannot be upheld on theoretical input-output calculations or internal records alone; in the absence of corroborative evidence such as unaccounted receipts, unidentified buyers, or proved tainted removals, the duty demand, confiscation and penalties were set aside. The demand was also partly time-barred, and the extended limitation period could not be invoked because the ingredients of suppression or similar conduct were not established where clandestine removal itself was unproved.

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Issues: (i) Whether duty demand, confiscation and penalties could be sustained on the basis of theoretical calculations and internal records without corroborative evidence of clandestine manufacture and removal of PTY; (ii) Whether part of the demand was barred by limitation and the extended period under the proviso to Section 11A(1) could be invoked.

Issue (i): Whether duty demand, confiscation and penalties could be sustained on the basis of theoretical calculations and internal records without corroborative evidence of clandestine manufacture and removal of PTY.

Analysis: The demand was founded on a presumed 1:1 input-output ratio and assumptions about loss of POY and anti-static oil. Such theoretical working was held insufficient to establish clandestine production or removal, especially when no evidence showed unaccounted POY receipts, unrecorded buyers, or tainted removals. The maintained records, including statutory and management records, were treated as inconsistent with the Revenue's allegation, and the absence of corroborative material was decisive.

Conclusion: The demand, confiscation and penalties were not sustainable and were set aside in favour of the assessee.

Issue (ii): Whether part of the demand was barred by limitation and the extended period under the proviso to Section 11A(1) could be invoked.

Analysis: The show cause notice was issued after a substantial lapse of time, and part of the alleged period fell beyond the permissible limitation. For the remaining period also, the ingredients required to invoke the extended period, including suppression or similar circumstances, were not established because no clandestine removal was proved.

Conclusion: The demand was barred for part of the period and the extended period could not be invoked for the balance period.

Final Conclusion: The adjudication order could not survive because the alleged clandestine manufacture and removal were not proved and the demand was also hit by limitation.

Ratio Decidendi: A demand for clandestine manufacture and removal cannot be upheld on presumptions or theoretical input-output calculations alone; corroborative evidence of removal is necessary, and the extended limitation period requires proof of the statutory ingredients for its invocation.

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