Clandestine removal allegations fail without corroboration and cross-examination, leaving duty demand and penalties unsustainable.

Allegations of clandestine removal of excisable goods must be proved by tangible, corroborated evidence, not by assumptions drawn from third-party statements alone. Where the department relies on statements of outsiders or a retracted statement of a company functionary, those depositions lose probative value if the witnesses are not produced for cross-examination. In the absence of material showing receipt of raw material, manufacture, removal, stock discrepancy, or receipt of cash for unaccounted clearances, the demand of duty and related penalties cannot be sustained. The appellate relief in favour of the assessee was therefore left undisturbed.

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Issues: (i) Whether the demand of duty and penalties for alleged clandestine removal of excisable goods could be sustained on the basis of statements and third-party records without corroborative evidence and without allowing cross-examination of witnesses.

Issue (i): Whether the demand of duty and penalties for alleged clandestine removal of excisable goods could be sustained on the basis of statements and third-party records without corroborative evidence and without allowing cross-examination of witnesses.

Analysis: The proceedings rested primarily on statements of persons from third-party concerns and a retracted statement of one company functionary. No material evidence established receipt of raw material, manufacture, removal, stock discrepancy, or receipt of cash for unaccounted clearances. The witnesses whose statements were relied upon were not made available for cross-examination, which vitiated reliance on those depositions. The absence of clinching evidence made the finding of clandestine removal one based on assumption and presumption rather than proof.

Conclusion: The demand of duty and the penalties could not be sustained and the relief granted by the appellate authority was correct, in favour of the assessee.

Final Conclusion: The Revenue failed to establish clandestine removal by cogent and corroborated evidence, and the order setting aside the duty demand and penalties was left undisturbed.

Ratio Decidendi: Allegations of clandestine removal must be proved by tangible and corroborative evidence, and statements relied upon against an assessee cannot be used unless the witnesses are made available for cross-examination.

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