Clandestine removal demands need corroborative evidence; assumptions and disputed statements cannot sustain excise duty, limitation, or penalties.

Central excise duty demand for alleged clandestine manufacture and removal failed because the Revenue relied on seized challan books, packing slips, an assumed input-output ratio, and an uncorroborated statement, without independent proof of excess raw material procurement, electricity consumption, transport movements, identified buyers, or flow-back of sale proceeds. The later dilution of the director's statement further weakened reliance on that evidence. Clandestine removal must be proved by tangible and corroborative material, not assumptions or theoretical calculations, so the demand was unsustainable. As the charge failed, the extended period of limitation could not be invoked and the consequential penalties and interest were also set aside.

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Issues: Whether the demand of central excise duty founded on alleged clandestine manufacture and removal could be sustained in the absence of corroborative evidence, whether the extended period of limitation could be invoked, and whether the consequential penalties and interest were sustainable.

Analysis: The demand rested mainly on seized challan books, packing slips, an assumed input-output ratio, and a statement of the director recorded during investigation. The record disclosed no independent verification of the production ratio, no evidence of excess procurement of raw materials, electricity consumption, transport movement, identified buyers, or flow back of sale proceeds. The director's later statement also diluted the earlier statement, and the statement evidence was not tested in the manner required for reliance upon such material. In matters of clandestine removal, the burden lies on the Revenue to establish the charge by tangible and corroborative evidence, and theoretical calculations or presumptions cannot replace proof.

Conclusion: The charge of clandestine manufacture and removal was not proved, the duty demand was unsustainable, the extended period could not be invoked, and the penalties and interest were liable to be set aside.

Final Conclusion: The appeal succeeded and the impugned demand and all consequential liability were annulled.

Ratio Decidendi: A charge of clandestine removal in central excise must be established by reliable and corroborative evidence, and where the Revenue relies only on assumptions, disputed statements, or theoretical input-output calculations, the demand, limitation notice, interest, and penalties cannot be sustained.

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