Central excise demand fails where clandestine removal is alleged only on estimates and unsupported technical opinion.

A central excise demand based only on estimated input-output ratios and a third-party technical opinion could not be sustained where no corroborative evidence of clandestine manufacture and removal was produced. The record lacked buyer statements, vehicle details, private records, cash transaction evidence, or any independent study of the plant, so the allegation rested on assumption rather than proof. The demand was also unsustainable on limitation because the notice did not establish specific suppression or deliberate withholding of facts to justify the extended period. The impugned order was therefore set aside and relief followed as per law.

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Issues: (i) whether a demand of central excise duty could be sustained merely on estimated input-output ratio and third-party technical opinion in the absence of corroborative evidence of clandestine manufacture and removal; (ii) whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): whether a demand of central excise duty could be sustained merely on estimated input-output ratio and third-party technical opinion in the absence of corroborative evidence of clandestine manufacture and removal.

Analysis: The demand was based substantially on a presumed consumption norm for iron ore and electricity and on expert opinions, without an independent study of the appellant's plant or verification of the actual factors affecting sponge iron manufacture. No corroborative material such as buyers' statements, vehicle details, private records, or cash transaction evidence was brought on record to show clandestine clearance. The reasoning adopted by the lower authority was therefore founded on assumption and presumption rather than tangible proof of suppressed production.

Conclusion: The demand could not be sustained and the finding against the assessee on alleged clandestine manufacture and removal was set aside.

Issue (ii): whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The show cause notice was issued much later than the search and completion of investigation, yet the notice did not disclose specific facts establishing suppression so as to justify the extended limitation period. In the absence of proved clandestine activity or deliberate suppression, the invocation of the extended period was not legally supportable.

Conclusion: The demand was also unsustainable on limitation.

Final Conclusion: The impugned order was set aside and the appeal succeeded on both merits and limitation, with consequential relief as per law.

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