Valid service and corroboration requirements defeat clandestine removal demand based only on electricity consumption.

A show cause notice must be effectively served on the person proceeded against; service on an ex-manager who was neither authorised nor an employee was insufficient, and the later corrigendum could not cure the defect or defeat limitation. Clandestine removal was not proved because electricity consumption alone could not establish production over a long period, especially without independent corroboration, disclosure of consumption details, or cross-examination of alleged buyers. As the demand failed on limitation and merits, the related duty demand, confiscation consequences, and penalties were also set aside.

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Issues: (i) whether the demand was barred by limitation and whether the show cause notice was validly served on the assessee; (ii) whether clandestine removal of goods was proved on the basis of electricity consumption and related material; (iii) whether the duty demand and penalties could be sustained.

Issue (i): whether the demand was barred by limitation and whether the show cause notice was validly served on the assessee

Analysis: The original notice was not effectively addressed to or served on the persons who were sought to be proceeded against. Mere handing over of copies to an ex-manager who was neither an authorised agent nor an employee of the assessee was held insufficient. The corrigendum materially altered the basis of the notice and, in substance, operated as the notice calling upon the assessee to answer the allegations. Issued long after the relevant period, it could not overcome limitation.

Conclusion: The demand was barred by limitation and the notice was not validly served on the assessee.

Issue (ii): whether clandestine removal of goods was proved on the basis of electricity consumption and related material

Analysis: Electricity consumption may be a relevant circumstance, but it cannot by itself establish the quantity manufactured over a long period. The allegation was not supported by independent corroboration, the alleged buyers were not offered for cross-examination, and the relevant consumption details were not furnished to the assessee. On that material, clandestine removal was not proved to the required standard.

Conclusion: Clandestine removal was not established.

Issue (iii): whether the duty demand and penalties could be sustained

Analysis: Once the demand itself failed both on limitation and on merits, the consequential penalties also could not survive. The order further noted that penalties could not be imposed where the governing levy did not provide for them.

Conclusion: The duty demand and penalties were not sustainable.

Final Conclusion: The appeal succeeded and the impugned duty demand, confiscation-related consequences, and penalties were set aside.

Ratio Decidendi: A show cause notice must be validly served on the person proceeded against, and clandestine removal cannot be inferred merely from electricity consumption without independent corroborative evidence.

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