Clandestine removal must be proved by corroborative evidence; private records and one statement alone could not sustain duty or penalty.

A demand for central excise duty on alleged clandestine removal cannot be sustained on private note pads, challan books and a single statement without corroborative evidence of manufacture, removal or related transactions. Here, there was no enquiry from the authors or custodians of the records, no investigation at the recipient end, and no supporting material such as unaccounted raw material purchases, excess electricity use, transport evidence or sale proceeds. The Tribunal held that clandestine removal must be proved by positive, tangible and independently verifiable evidence, so the duty demand, interest and connected penalty on the firm were set aside. The partner's penalty under Rule 26 also failed because it rested on the same unproved allegation.

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Issues: (i) Whether the demand of central excise duty on alleged clandestine removal could be sustained on the basis of private records and the statement of the authorised signatory without corroborative evidence; (ii) Whether the penalty imposed on the partner under Rule 26 of the Central Excise Rules, 2002 was sustainable.

Issue (i): Whether the demand of central excise duty on alleged clandestine removal could be sustained on the basis of private records and the statement of the authorised signatory without corroborative evidence.

Analysis: The charge rested on seized private note pads, challan books and the statement of one authorised signatory, but there was no supporting enquiry from the authors or custodians of the private records, no investigation at the recipient end, no evidence of unaccounted raw material purchase, excess electricity consumption, transport, or sale proceeds, and no independent linkage showing actual manufacture and removal of the alleged goods. The Tribunal applied the settled principle that clandestine removal is a serious charge and must be proved by tangible, corroborative evidence rather than assumptions or inferences.

Conclusion: The duty demand, together with interest and the connected penalty on the appellant firm, was not sustainable and was set aside.

Issue (ii): Whether the penalty imposed on the partner under Rule 26 of the Central Excise Rules, 2002 was sustainable.

Analysis: The partner's penalty was founded on the same uncorroborated allegation of clandestine clearance. Since the underlying demand itself was not supported by positive evidence, the basis for fastening personal penalty also failed.

Conclusion: The penalty imposed on the partner was not sustainable and was set aside.

Final Conclusion: The appeals succeeded because the alleged clandestine removal was not established by reliable and corroborated evidence, and the consequential duty demand and penalties could not be sustained.

Ratio Decidendi: A demand for clandestine removal cannot rest solely on private documents or a single uncorroborated statement; it must be supported by positive, tangible and independently verifiable evidence of manufacture, removal and associated transactions.

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