Clandestine Removal Needs Positive Evidence, Not Mere Inference From Invoice Cancellation And Surrounding Circumstances

A charge of clandestine removal of excisable goods requires positive and reliable evidence of clandestine production, removal, or actual clearance. Cancellation of an invoice, stock verification showing a shortage, proximity between buyer and seller, and other surrounding circumstances were treated as insufficient on their own, where no corroborative documentary or other direct evidence supported the allegation. An explanation that the invoice was cancelled for lack of duty balance and that the goods remained in filtration tanks weakened the inference of clandestine clearance. The adverse finding was therefore unsustainable, and consequential relief followed.

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Issues: Whether the allegation of clandestine removal of excisable goods was proved on the basis of the cancellation of invoice, stock verification, and surrounding circumstances.

Analysis: The case rested on the cancellation of one invoice, the absence of the disputed quantity in stock during verification, and the inference drawn from the fact that the buyer and seller were group concerns located nearby. The explanation offered was that the invoice was cancelled for want of sufficient duty balance and that the goods were in filtration tanks. There was no positive documentary or other corroborative evidence showing clandestine production, removal, or actual clearance to the consignee. Circumstances such as proximity of the parties, short interval between invoice issue and cancellation, and a different view on the stage of manufacture were held insufficient by themselves to establish clandestine clearance.

Conclusion: The allegation of clandestine removal was not proved and the finding against the assessee was unsustainable.

Final Conclusion: The impugned order could not be sustained because the adverse finding was based on inference rather than reliable evidence, and the assessee was entitled to consequential relief.

Ratio Decidendi: A charge of clandestine production and removal must be supported by positive and reliable evidence, and cannot be upheld on assumptions, presumptions, or surrounding circumstances alone.

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