Clandestine removal may be proved by corroborative records, while duty and credit must be recomputed on proper valuation and evidence.

Clandestine removal can be established through private records, labour contractor records and corroborative statements, and the tribunal treated such evidence as sufficient to sustain findings of unaccounted receipt of scrap and unrecorded production. Duty, however, must be re-computed on the correct assessable value with admissible modvat and cum-duty benefit, while the dispute on irregular modvat credit for imported scrap required reconsideration on the full evidence rather than reliance on end use certificates alone. Confiscation was maintained, but the redemption fine was reduced.

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Issues: (i) whether unaccounted receipt of scrap and clandestine manufacture and clearance of ingots and re-rolled products were established; (ii) whether the duty demand required re-quantification by granting modvat and cum-duty benefit; (iii) whether the irregular modvat credit on imported scrap and the connected penalties required de novo adjudication; and (iv) whether the confiscation and redemption fine called for modification.

Issue (i): Whether unaccounted receipt of scrap and clandestine manufacture and clearance of ingots and re-rolled products were established

Analysis: The material on record, including private records, labour contractor records, and statements of persons connected with procurement and production, was found sufficient to support the conclusion that 2602.500 MTs of scrap had not been accounted for and had been used in unrecorded production. The defence that the quantity was diverted to trading activity was not accepted in view of the totality of the evidence.

Conclusion: The finding of clandestine suppression and unaccounted production was upheld.

Issue (ii): Whether the duty demand required re-quantification by granting modvat and cum-duty benefit

Analysis: Though the demand on the unaccounted scrap was sustained, the duty computation did not extend modvat benefit or treat the sale value as cum-duty price. The duty liability therefore required fresh computation on the basis of the correct assessable value and admissible credit benefit.

Conclusion: The duty demand was upheld in principle, but the matter was remanded for re-quantification after granting modvat and cum-duty benefit.

Issue (iii): Whether the irregular modvat credit on imported scrap and the connected penalties required de novo adjudication

Analysis: The finding based solely on end use certificates was not accepted as conclusive because the Department had led substantial contrary evidence suggesting diversion of imported scrap. The issue of actual receipt and use of the imported scrap required reconsideration on all the evidence, and the penalties linked to that issue had to follow the fresh determination.

Conclusion: The matter relating to irregular modvat credit on imported scrap and the connected penalties was remanded for de novo adjudication.

Issue (iv): Whether the confiscation and redemption fine called for modification

Analysis: The confiscation of land, plant, building and related assets was maintained, but the redemption fine was considered excessive and was reduced. The confiscation of the vehicle also remained confirmed with a reduced fine.

Conclusion: The confiscation was upheld, while the redemption fine was reduced.

Final Conclusion: The order was sustained on the finding of unaccounted production and clandestine activity, but the duty, interest and penalty consequences were left for fresh determination to the extent indicated, and the imported-scrap credit dispute was sent back for reconsideration on the full evidence.

Ratio Decidendi: Clandestine removal may be sustained on circumstantial and corroborative evidence, but duty must be re-computed on the correct tax basis and credit entitlements, and an issue cannot rest conclusively on end use certificates where contrary evidence requires full adjudication.

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