Clandestine removal can be inferred from stock shortage and unaccounted goods, with duty quantified on net record discrepancies.

Unexplained stock shortage, together with unaccounted goods found in factory premises, can support an inference of clandestine removal even without direct proof of removal or sale. On that basis, duty demand, confiscation and penalty may follow, subject to any relief on redemption fine where the facts warrant it. Where suppression is quantified by comparing statutory records with private production records, excess entries in the statutory record on other dates should be credited against short entries, so duty is confined to the net shortage after adjustment. The stated ratio emphasises both circumstantial proof of suppression and fair netting of records for duty computation.

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Issues: (i) whether the shortage in finished goods and the unaccounted goods found in the factory justified a finding of clandestine removal, duty demand, confiscation and penalty; (ii) whether the appellants were entitled to adjustment of excess entries in the statutory record against short entries while determining the duty demand on suppressed production.

Issue (i): whether the shortage in finished goods and the unaccounted goods found in the factory justified a finding of clandestine removal, duty demand, confiscation and penalty.

Analysis: The statutory records and physical verification showed shortage in stock and unaccounted goods in the factory premises. The unexplained shortage supported an inference of clandestine removal, and direct evidence of removal or sale was not necessary where the records and circumstances pointed to suppression. As to the unaccounted ingots, benefit of doubt was given only for the portion reasonably attributable to the previous day's production, but the balance remained without accountal.

Conclusion: The finding of clandestine removal was upheld for the shortage, duty demand and penalty on that count were sustained, and confiscation of the unaccounted goods was upheld with reduction of the redemption fine.

Issue (ii): whether the appellants were entitled to adjustment of excess entries in the statutory record against short entries while determining the duty demand on suppressed production.

Analysis: Where suppression was worked out by comparing the statutory record with the private daily performance report, fairness required giving credit for excess recordings in the statutory record over the private record on other dates. The duty demand was therefore to be confined to the net shortage after such adjustment.

Conclusion: The appellants were held entitled to the benefit of excess entries, and the duty demand was restricted accordingly.

Final Conclusion: The appeal succeeded only in part, with partial relief granted on confiscation fine, duty quantification and penalty, while the core findings on clandestine removal and liability to duty were substantially maintained.

Ratio Decidendi: An unexplained stock shortage coupled with unaccounted goods and suppressed production records can justify an inference of clandestine removal, and where suppression is determined by comparison of two records, credit must be given for excess entries in the statutory record for proper quantification of duty.

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