Clandestine removal allegations require corroborative evidence; duty demand and penalty were set aside for lack of proper investigation.

Allegations of clandestine removal must be supported by proper investigation and corroborative evidence; they cannot rest on assumptions or the mere absence of proof of return after weighment. Here, the assessee's ledger entries, balance sheet figures, ER-1 returns and duty payment details supported its explanation that scrap was cleared on payment of duty, while the adjudication did not compare production with scrap generation or meaningfully test the existing record. The duty demand and penalty were therefore not sustainable and were set aside.

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Issues: Whether duty demand and penalty on alleged clandestine removal of scrap sent under non-returnable gate passes, without proper investigation and supporting evidence, were sustainable.

Analysis: The demand was founded on the premise that scrap sent for weighment under non-returnable gate passes had been cleared without duty. The record showed that the assessee had explained the practice adopted for weighment, had relied on ledger entries, balance sheet figures, ER-1 returns and duty payment details, and had asserted that duty was paid on scrap clearances. The impugned adjudication proceeded mainly on the footing that no proof was produced regarding return of the goods after weighment, without undertaking a proper comparison of production and scrap generation or examining the material already on record. In a case alleging clandestine removal, such a finding cannot rest on assumptions or presumptions alone and requires cogent corroboration.

Conclusion: The duty demand and penalty were not sustainable and were set aside.

Final Conclusion: The assessee succeeded, and the appeal was allowed with consequential relief in accordance with law.

Ratio Decidendi: Allegations of clandestine removal must be proved by proper investigation and corroborative evidence and cannot be upheld merely on presumptions where the assessee's records and explanations indicate duty-paid clearances.

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