Clandestine removal and limitation require proof, not suspicion, and mere accounting lapses do not sustain confiscation or penalty.

Mere accounting lapses, overwritings in production slips, or stock discrepancies do not justify confiscation, duty demand, or penalty unless supported by conclusive evidence of clandestine removal or deliberate contravention. Goods found unentered in a bonded store room may be treated as an accounting omission where they relate to prior production and no evasion is shown. Goods in a finishing room are not liable as fully finished goods if they remain in process and have not attained the character required for record entry. The extended limitation period cannot be invoked where the department already knew the stock position and there is no proof of suppression with intent to evade duty.

---

---

Issues: (i) Whether the unaccounted 34 pieces found in the bonded store room were liable for confiscation and penalty; (ii) whether the goods found in the finishing room were fully finished goods liable for confiscation and penalty; (iii) whether the duty demand based on the alleged clandestine removal of 252 pieces of blockboard was sustainable; and (iv) whether the duty demand based on the alleged shortage of veneer and consequential demand on commercial plywood was barred by limitation.

Issue (i): Whether the unaccounted 34 pieces found in the bonded store room were liable for confiscation and penalty.

Analysis: The goods pertained to production of the previous day and were not entered in the statutory records by the date of visit because the dealing assistant was on leave. The discrepancy was therefore treated as a mere accounting lapse without any indication of clandestine removal or deliberate contravention.

Conclusion: The confiscation and penalty on this count were not sustainable and the finding is in favour of the assessee.

Issue (ii): Whether the goods found in the finishing room were fully finished goods liable for confiscation and penalty.

Analysis: The goods were found as a mixed lot in the finishing room and their segregation variety-wise and size-wise took nearly two days under departmental supervision. This showed that they were still in various stages of finishing and had not yet attained the character of fully finished goods required for entry in the statutory records. No clandestine removal was alleged in respect of these goods.

Conclusion: The confiscation and penalty on this count were not sustainable and the finding is in favour of the assessee.

Issue (iii): Whether the duty demand based on the alleged clandestine removal of 252 pieces of blockboard was sustainable.

Analysis: The demand rested on overwritings and corrections in production slips. The total production shown in those slips was correctly worked out, and the corrections created only suspicion rather than conclusive proof of excess manufacture or clandestine clearance. In the absence of independent evidence, suspicion could not sustain a duty demand or penalty.

Conclusion: The duty demand and penalty on this count were not sustainable and the finding is in favour of the assessee.

Issue (iv): Whether the duty demand based on the alleged shortage of veneer and consequential demand on commercial plywood was barred by limitation.

Analysis: The department had knowledge of the stock position after the factory visit, yet the first notice raised no duty demand and the later notice invoking the extended period came nearly four years later. In those circumstances, suppression with intent to evade duty was not established, and the extended limitation could not be invoked. The consequential penalties also could not survive.

Conclusion: The demand was time-barred and the consequential penalties were unsustainable, in favour of the assessee.

Final Conclusion: The impugned order was set aside in full, with all duty demands, confiscation, and penalties failing.

Ratio Decidendi: Mere suspicion, corrections in records, or a technical lapse in accounting do not justify confiscation, duty demand, or penalty unless supported by conclusive evidence; where the department has prior knowledge, the extended period of limitation cannot be invoked without proof of suppression with intent to evade duty.

---