Clandestine removal allegations fail where inflated declarations lack independent corroboration from records and other positive evidence.

Inflated sales figures furnished to the Department of Industries, by themselves, were insufficient to sustain excise duty demand and penalty for alleged clandestine manufacture and removal. The Tribunal held that such declarations, made for a different administrative purpose, required independent corroboration from the assessee's records or other positive evidence. Here, the verification covered only part of the relevant period, and the assessee's excise records and raw material consumption data were not properly tested against the allegation. On that basis, the demand and penalty were set aside for want of sufficient proof.

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Issues: Whether the demand of duty and penalty could be sustained on the basis of inflated sales figures furnished to the Department of Industries, without independent corroborative evidence of clandestine manufacture and removal.

Analysis: The Department relied mainly on the figures submitted to the State Industries Department and the supporting affidavit. The Tribunal noted that similar material had earlier been held insufficient to establish clandestine removal in the absence of positive corroboration. In the present case, the verification by the Industries Department covered only part of the relevant period, while the assessee maintained that the figures given to that department were inflated only to obtain a higher quota of scarce raw material. The assessee's own records, including excise records and raw material consumption data, were available and could have been examined to test whether the alleged higher production was probable. Mere reliance on figures given to another authority, without supporting evidence from the assessee's records or other independent material, was not enough to prove clandestine clearance.

Conclusion: The demand of duty and the penalty were not sustainable and were set aside.

Final Conclusion: The appeal succeeded and the impugned demand and penalty were annulled for want of sufficient proof of clandestine removal.

Ratio Decidendi: In tax matters, a declaration made to another authority for a different purpose cannot, by itself, establish clandestine manufacture or removal unless supported by independent corroborative evidence.

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