Strict proof for clandestine removal fails where investigation statements and computer records do not meet admissibility requirements.

Statements recorded during investigation cannot be used as substantive evidence unless the Section 9D procedure is strictly followed, including examination of the maker or a recorded basis for the statutory exception; without that compliance, they are unreliable for sustaining a demand. Seized papers, notebooks and computer-derived material are admissible only if the Section 36B foundational requirements are met and the required certificate is produced; unsigned, unverified and selectively used records do not satisfy that standard. A charge of clandestine manufacture and removal must be proved by independent, corroborative evidence, not assumption or presumption. On that footing, the duty, interest and penalty demand could not survive.

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Issues: (i) Whether statements recorded during investigation under Section 14 of the Central Excise Act, 1944 could be relied upon without compliance with Section 9D of the Central Excise Act, 1944. (ii) Whether the seized documents, notebooks and computer-derived materials satisfied the mandatory requirements of Section 36B of the Central Excise Act, 1944. (iii) Whether the available materials conclusively established clandestine manufacture and removal of excisable goods.

Issue (i): Whether statements recorded during investigation under Section 14 of the Central Excise Act, 1944 could be relied upon without compliance with Section 9D of the Central Excise Act, 1944.

Analysis: The statements forming the main basis of the demand were recorded during investigation. Under Section 9D, such statements cannot be treated as substantive evidence unless the statutory procedure is followed. The makers of the statements were not examined before the adjudicating authority, no reasoned finding was recorded to attract the exceptional situations under Section 9D(1)(a), and the request for cross-examination was not granted. The silence or inability of a deponent to comment on selective entries, especially where the full set of invoices was not shown, could not be treated as an admission of clandestine activity.

Conclusion: The statements were not admissible as substantive evidence and could not be relied upon to sustain the demand, in favour of the assessee.

Issue (ii): Whether the seized documents, notebooks and computer-derived materials satisfied the mandatory requirements of Section 36B of the Central Excise Act, 1944.

Analysis: The Revenue relied on seized papers, notebooks and comparison charts as computer-derived or electronic materials. No certificate under Section 36B(4) was produced, and the foundational conditions for admissibility under Section 36B(2) were not established. The seized papers were unsigned, unconfirmed, and not shown to have been authored or authenticated by the appellant or the alleged buyer. The partial and selective use of such material, without verifying it against the full universe of invoices issued to all customers, rendered the evidentiary basis unreliable.

Conclusion: The materials did not satisfy Section 36B and could not be treated as admissible evidence, in favour of the assessee.

Issue (iii): Whether the available materials conclusively established clandestine manufacture and removal of excisable goods.

Analysis: A charge of clandestine removal must be proved by tangible, independent and corroborative evidence. The record lacked proof of excess raw material procurement, stock shortages, vehicle movement, recovery of unaccounted cash, verification of the alleged buyer's books, or any independent admission of duty-free purchases. Electricity consumption, even if considered, could at best be corroborative and could not by itself establish the charge. In the absence of legally admissible statements and reliable documentary support, the allegation remained based on assumption and presumption.

Conclusion: The Revenue failed to establish clandestine manufacture and removal, in favour of the assessee.

Final Conclusion: The demand of duty, interest and equal penalty could not survive once the foundational evidence was found inadmissible and the alleged clandestine removal remained unproved. The appeal was therefore allowed and the impugned order was set aside to that extent.

Ratio Decidendi: Statements recorded under investigation and computer-derived records cannot be used to prove clandestine removal unless the mandatory statutory procedures governing admissibility are strictly complied with, and such a serious allegation must be supported by independent corroborative evidence.

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