Clandestine removal requires corroborated proof; private records, untested statements and electronic print-outs were held insufficient.

A charge of clandestine removal must be proved by tangible, corroborated evidence; assumptions, private notebooks, unverified statements, and estimated stock shortages are insufficient. The Tribunal held that the Revenue failed to show excess raw material procurement, identifiable buyers, transport trail, cash flow, or electricity-based corroboration, so the demand could not stand. Statements recorded during investigation were inadmissible without compliance with Section 9D, and electronic print-outs from pen-drives or hard disks were unusable without compliance with Section 36B. As the duty demand failed, the consequential interest and penalties on the company and its officers were also set aside.

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Issues: (i) whether the allegation of clandestine removal could be sustained on assumptions and presumptions without corroborative evidence; (ii) whether private records could establish clandestine removal in the absence of corroboration; (iii) whether statements recorded during investigation had evidentiary value without compliance with Section 9D of the Central Excise Act, 1944; (iv) whether print-outs from electronic equipment and pen-drives were admissible without compliance with Section 36B of the Central Excise Act, 1944; (v) whether stock shortage assessed by eye estimation could form the basis of clandestine removal; and (vi) whether penalties were imposable when the duty demand itself was unsustainable.

Issue (i): whether the allegation of clandestine removal could be sustained on assumptions and presumptions without corroborative evidence.

Analysis: The demand rested on search material, recovered documents, and statements, but no independent evidence was brought to establish excess raw material procurement, actual unaccounted removals, identified buyers, transportation trail, receipt of sale proceeds, or excess electricity consumption. In clandestine removal matters, the burden lies on the Revenue to prove the charge by tangible material and not by inference alone.

Conclusion: The issue was answered in favour of the appellants.

Issue (ii): whether private records could establish clandestine removal in the absence of corroboration.

Analysis: The private notebooks, note pads, and other seized records were not linked by reliable independent evidence to unaccounted manufacture or clearance. The records were not corroborated by purchaser statements, transporter evidence, proof of raw material movement, or proof of cash flow. Private records by themselves were treated as insufficient to sustain the charge.

Conclusion: The issue was answered in favour of the appellants.

Issue (iii): whether statements recorded during investigation had evidentiary value without compliance with Section 9D of the Central Excise Act, 1944.

Analysis: The statements relied upon by the adjudicating authority were recorded during investigation, but the procedure under Section 9D was not followed. The makers of the statements were not properly examined as witnesses before the adjudicating authority in the manner required by law. Without such compliance, the statements could not be treated as admissible and reliable evidence for proving the truth of their contents.

Conclusion: The issue was answered in favour of the appellants.

Issue (iv): whether print-outs from electronic equipment and pen-drives were admissible without compliance with Section 36B of the Central Excise Act, 1944.

Analysis: The print-outs were derived from storage devices such as pen-drives and hard disks, but the statutory conditions for admissibility of computer outputs were not fulfilled. No proper certificate was produced and the devices were not shown to satisfy the legal requirements governing electronic records. Such print-outs could not, therefore, be used as substantive corroboration of clandestine clearance.

Conclusion: The issue was answered in favour of the appellants.

Issue (v): whether stock shortage assessed by eye estimation could form the basis of clandestine removal.

Analysis: The alleged shortage was determined in a very short time and on rough estimation, without dependable weighment or documentary support. In the absence of reliable physical verification and supporting evidence, an estimated shortage could not justify a charge of clandestine removal.

Conclusion: The issue was answered in favour of the appellants.

Issue (vi): whether penalties were imposable when the duty demand itself was unsustainable.

Analysis: Since the foundation of the demand of duty failed, the consequential penalties on the company and its officers also could not survive. Penalty cannot stand where the principal allegation of clandestine removal is not established.

Conclusion: The issue was answered in favour of the appellants.

Final Conclusion: The duty demand, interest, and penalties were set aside because the allegation of clandestine removal was not proved by legally admissible and corroborated evidence.

Ratio Decidendi: A charge of clandestine removal must be proved by tangible, corroborated evidence, and reliance on private records, investigation statements, or electronic print-outs is impermissible unless the statutory requirements governing their admissibility are strictly satisfied.

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