Clandestine manufacture and removal established where goods were cleared through a non-operational unit to retain exemption benefits

Contemporaneous physical evidence and corroborative statements established that goods were manufactured in one unit but cleared in the name of another non-operational unit to remain within the small scale exemption limit. The supposed clearing unit had no working manufacturing activity, as its machinery was dismantled, electricity disconnected, workers absent, and no records or invoices found. Excess finished and semi-finished stock, along with private records, was recovered from the other unit. On that basis, clandestine manufacture and removal were proved, and the duty demand with penalties was sustained.

---

---

Issues: Whether the demand of duty and penalties were sustainable on the basis that the goods shown as cleared from one unit were in fact manufactured and removed from another unit to avail small scale exemption.

Analysis: The evidence showed that the unit in whose name the clearances were claimed had no working manufacturing activity, the machinery was dismantled, electricity was disconnected, no workers were present, and no records or invoices were found there. In contrast, excess finished and semi-finished stock was found in the other unit, private records were recovered, and statements recorded during investigation consistently indicated that the goods were actually manufactured in that unit and cleared in the name of the non-functioning unit to remain within the exemption limit. The appellant did not rebut the evidence accepted by the authorities below.

Conclusion: The duty demand and penalties were rightly sustained. The finding of clandestine manufacture and removal was upheld against the assessee.

Ratio Decidendi: Where contemporaneous physical evidence and corroborative statements establish that goods were manufactured in one unit but cleared in the name of another non-operational unit to avail exemption, the demand and consequential penalties are maintainable.

---