Clandestine removal demands fail without corroboration and Section 9D compliance for witness statements.

A demand for central excise duty based on alleged clandestine removal was unsustainable where it rested mainly on third-party records and untested statements, without corroboration from the assessee's premises. Statements could not be relied on unless tested in the manner required by Section 9D of the Central Excise Act, 1944, and the absence of evidence such as stock discrepancies, excess raw material use, transport trail, sale proceeds or power-consumption data left the allegation unproved. The duty demand and consequential penalty were therefore set aside.

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Issues: Whether the demand of central excise duty and penalty for alleged clandestine removal was sustainable when the case rested mainly on third-party records and statements, and whether such statements could be relied upon without compliance with the mandatory procedure under Section 9D of the Central Excise Act, 1944.

Analysis: The proceedings were founded on records recovered from a buyer and statements recorded during investigation, while no incriminating material, stock discrepancy, excess raw material consumption, transport evidence, sale proceeds trail, or power-consumption evidence was gathered from the appellant's premises. The statements relied upon were not tested in the manner required by Section 9D of the Central Excise Act, 1944, and the adjudication also lacked the broader corroboration necessary to establish clandestine removal, which is a serious charge requiring cogent evidence rather than assumption and presumption. The absence of proper investigation into production, procurement, movement and clearance of goods further weakened the demand.

Conclusion: The demand of duty and the consequential penalty were unsustainable. The impugned order was set aside and the appeal was allowed in favour of the assessee.

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