Clandestine removal allegations fail without positive evidence, while contemporaneous production slips may support only a reduced penalty.

Allegations of clandestine removal were found unsustainable because contemporaneous production slips supported the assessee's record of raw material issue and manufacture, and no positive evidence of suppression or removal was produced. Incomplete statutory books, by themselves, were held insufficient to reject those supporting records or to justify confiscation and duty demand on short-found inputs. The lapse in record maintenance could justify a penalty, but not the substantive demand or confiscation on the facts shown. The reduced penalty was therefore upheld, while the confiscation and duty demand were not sustained.

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Issues: Whether confiscation of excess goods, confirmation of duty on short-found inputs, and penalty were justified in the absence of positive evidence of clandestine removal, where production slips showed movement of raw materials and manufacture during the relevant period.

Analysis: The production slips maintained for the relevant period were treated as reliable supporting records showing issuance of raw material and production, and the absence of entries in the statutory books was not, by itself, sufficient to discard them. The finding of clandestine removal required positive evidence, which was not available on the record. The lapse in maintenance of statutory records could justify penalty, but not the substantive demands and confiscation on the facts proved.

Conclusion: The confiscation and duty demand were not sustainable; only the reduced penalty was upheld. The result was in favour of the assessee and against the Revenue.

Final Conclusion: The appeal was rejected after affirming the order of the appellate authority on the substantive demand and confiscation, with penalty restricted to the reduced amount.

Ratio Decidendi: Allegations of clandestine removal cannot be sustained merely on incomplete statutory records when contemporaneous production slips support the assessee's version and no positive evidence of suppression or removal is produced.

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