Clandestine removal demands fail without corroborative evidence; cash, goods, duty demands and penalties were all set aside.

In alleged clandestine removal matters, the Department must prove its case with affirmative, tangible and corroborative evidence; assumptions, theoretical calculations and mere non-explanation by the assessee are insufficient. The currency seized from residential and factory was not shown to be sale proceeds of unaccounted clearances, as the assessees produced documentary explanations, so confiscation was set aside. Goods seized from another premises were also released because the confiscation finding rested on unproved stock assumptions and was not effectively supported by reliable evidence. Duty demands and penalties based on alleged unaccounted manufacture and removal likewise failed for want of proof of clandestine buyers, transport, receipt of sale proceeds or suppression, and were quashed.

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Issues: (i) whether the cash seized from the residential premises of the Sarin family and from the factory office was liable to confiscation as sale proceeds of clandestinely removed goods; (ii) whether the goods seized from the premises of Basudeo Prasad & Sons were liable to confiscation; (iii) whether the demands of central excise duty and the related penalties were sustainable on the basis of alleged unaccounted manufacture and clandestine removal.

Issue (i): whether the cash seized from the residential premises of the Sarin family and from the factory office was liable to confiscation as sale proceeds of clandestinely removed goods.

Analysis: The Department did not produce cogent or corroborative evidence to connect the seized currency with clandestine clearances. The explanations for the family cash were supported by documentary material, including sources such as sale of gold, agriculture receipts and property consideration, and the cash found at the factory office was explained as sale consideration of a vehicle. The record did not establish that the amount represented sale proceeds of unaccounted goods, and mere non-explanation at the time of search was held insufficient to discharge the Department's burden.

Conclusion: The cash seizure and confiscation were not sustainable and were set aside in favour of the assessee.

Issue (ii): whether the goods seized from the premises of Basudeo Prasad & Sons were liable to confiscation.

Analysis: The finding of confiscation was found to rest on assumptions about pencil-maintained records and alleged stock mismatch, without considering the invoices, PLA entries, Pappu Long Book entries and the letter stating that the seized goods were duty paid. The materials relied upon by the assessee were not effectively controverted, and the alleged connivance or manipulation of records was not supported by reliable evidence.

Conclusion: The confiscation of the seized goods was set aside in favour of the assessee.

Issue (iii): whether the demands of central excise duty and the related penalties were sustainable on the basis of alleged unaccounted manufacture and clandestine removal.

Analysis: The demand was held to be based on a theoretical approach and incomplete calculation, while ignoring the quantitative stock register and the composite formula and wastage records produced by the assessee. No corroborative evidence was brought on record to prove clandestine manufacture, clearance, buyers, transport, or receipt of sale proceeds. In the absence of tangible evidence and in view of the Department's failure to discharge the burden of proof, the allegations of suppression and willful evasion were not accepted.

Conclusion: The duty demands and penalties were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The appeals succeeded in full, with all confiscations, duty demands and penalties quashed and consequential relief granted according to law.

Ratio Decidendi: In cases of alleged clandestine removal and confiscation of currency or goods, the Department must establish its case by affirmative, tangible and corroborative evidence; assumptions, theoretical calculations and mere non-explanation by the assessee are insufficient to sustain demand, confiscation or penalty.

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