Clandestine manufacture cannot be proved by power consumption alone when technical and corroborative evidence is unreliable.

Clandestine manufacture and removal of steel ingots and CTD bars could not be proved merely from excess power consumption and related papers. The technical consumption norm was rejected because it lacked trial production, supporting scientific data, proper furnace-wise comparison, and reliable calculations; the assessee's contrary technical evidence was also not properly considered. The corroborative invoices, loose slips, dealer statements and recovered materials were weakened by retractions, cross-examination, absence of the dealers before the authority, and no dependable proof of unaccounted procurement, clandestine clearance or receipt of sale proceeds. The Tribunal was therefore right to hold that revenue had not established evasion by reliable evidence, and the duty demand and penalties were unsustainable.

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Issues: Whether the demand of duty and penalties for alleged clandestine manufacture and removal of steel ingots and CTD bars could be sustained mainly on the basis of excess power consumption and the connected documentary and oral evidence.

Analysis: The demand was founded substantially on consumption norms suggested by technical witnesses and on certain invoices, loose slips, statements of dealers and other recovered materials. The technical evidence was found unreliable because no trial production was undertaken, no standard scientific data or literature supported a fixed consumption norm, furnace-wise differences were not properly accounted for, and the witness had admitted errors in his calculations. The assessee's contrary technical evidence was also not duly appreciated by the assessing authority. The alleged corroborative statements and documents were weakened by retractions, cross-examination, absence of the dealers before the authority, and lack of reliable proof of unaccounted procurement, clandestine clearance, or receipt of sale proceeds.

Conclusion: The Tribunal was right in holding that clandestine production could not be established solely on power consumption and that the revenue had not proved the alleged evasion by reliable evidence. The duty demand and consequential penalties were unsustainable.

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