Clandestine manufacture demands require proof, not suspicion alone; a single inspection and missing records were insufficient here.

Differential duty demand and penalties could not be sustained where the authorities relied on a single inspection and suspicious circumstances, but failed to establish manufacture outside the licensed premises. The record showed absence of materials and account books at the unit, and storage of some records and raw materials at another related premises, yet there were no worker statements, no statement from the related proprietor, no seizure of payment records for finished goods, and no investigation proving where the matches were actually manufactured. On that evidentiary basis, the demand and penalties were set aside.

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Issues: Whether the differential duty demand and penalties could be sustained on the basis of a single visit, absence of dipping activity and raw materials in the unit, and related circumstances, without adequate investigation and proof of manufacture outside the licensed premises.

Analysis: The record showed only suspicious circumstances, namely the absence of certain materials and account books in the appellants' premises on the date of inspection and the keeping of materials and records in another related premises. There was no statement from workers, no statement from the proprietor of the related premises, no seizure of records showing payment for finished goods, and no investigation establishing where the matches were actually manufactured. The authorities relied on assumptions from a single inspection to infer that manufacturing had been carried on outside the licensed premises for three years, despite the physical control regime and the absence of any corroborative evidence of clandestine removal or irregular manufacture.

Conclusion: The demand and penalties were not sustainable. The order was set aside and the appeals were allowed.

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