Clandestine removal requires corroborated evidence; bank stock statements and civil admissions alone are not conclusive proof.

In clandestine excise cases, the department bears the burden of proving unaccounted manufacture and removal, though it may rely on circumstantial evidence. Bank-linked stock statements and physical stock verification, without independent proof of actual production and clearance, were treated in the majority view as insufficient to sustain the allegation. Admissions in civil pleadings are relevant but not conclusive in taxing proceedings, and statements made for a different purpose cannot by themselves establish clandestine removal without corroboration. The commentary notes that the majority favoured the assessee on both evidentiary issues, but the reference was ultimately resolved for the revenue, resulting in dismissal of the appeal and confirmation of duty and penalty.

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Issues: (i) Whether the stock reports available with the bank were sufficient to hold that the goods were clandestinely manufactured and cleared without payment of duty. (ii) Whether the averments made in the plaint before the Delhi High Court could be relied upon as conclusive proof against the appellants.

Issue (i): Whether the stock reports available with the bank were sufficient to hold that the goods were clandestinely manufactured and cleared without payment of duty.

Analysis: The burden to establish clandestine manufacture and removal lies on the department, but such proof may rest on circumstantial evidence and the surrounding facts. In the majority view, the bank-related stock statements and the bank's physical stock verification, without supporting evidence of actual manufacture and clearance, were insufficient to sustain the charge. The contrary view treated the same material, together with the appellants' failure to explain the discrepancy or substantiate alleged open-market purchases, as adequate evidence in the overall circumstances.

Conclusion: In the majority view, the issue was decided in favour of the assessee and against the revenue; the department failed to prove clandestine manufacture and removal.

Issue (ii): Whether the averments made in the plaint before the Delhi High Court could be relied upon as conclusive proof against the appellants.

Analysis: Admissions are relevant and may be used against the maker, but they are not conclusive and must be assessed in context. The majority held that statements made in civil proceedings for a different purpose could not by themselves constitute conclusive proof of clandestine manufacture in taxing proceedings, especially when the adjudicating authority had not relied on them originally and no independent corroboration existed. The dissenting view treated the plaint averments as admissions that strongly supported the department's case and corroborated the bank-related material.

Conclusion: In the majority view, the issue was decided in favour of the assessee and against the revenue; the plaint averments were not conclusive proof of clandestine removal.

Final Conclusion: The appeal succeeded before the majority on the evidentiary insufficiency of the department's case, but the reference was resolved by the third member in favour of the revenue, resulting in dismissal of the appeal and confirmation of the duty and penalty order.

Ratio Decidendi: In clandestine excise matters, the department must establish removal without payment of duty by sufficient evidence, and admissions or bank-based stock statements, by themselves, are not conclusive unless corroborated by material showing actual manufacture and clearance.

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