Clandestine Removal Requires Corroborative Evidence, as internal stock discrepancies alone do not justify duty demand.

Duty cannot be sustained on internal stock verification discrepancies alone unless the Revenue first proves clandestine removal through cogent corroborative evidence. Mere shortages or excess stock figures, without supporting material such as unaccounted inputs, abnormal power use, transport evidence, or extra consideration, are insufficient to establish removal without payment of duty. A payment made to avoid litigation and expressly without prejudice does not amount to an admission of liability, and it does not shift the burden to the assessee unless a prima facie case based on actual stock discrepancy and clandestine removal is first established.

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Issues: (i) whether demand of duty could be sustained on discrepancies between internal stock verification and physical stock in the absence of corroborative evidence of clandestine removal; (ii) whether payment made by the assessee and the stock discrepancies were sufficient to shift the burden of proof onto the assessee.

Issue (i): Whether demand of duty could be sustained on discrepancies between internal stock verification and physical stock in the absence of corroborative evidence of clandestine removal.

Analysis: The discrepancies relied upon by the Revenue were found to relate to the company's internal stock verification and computer records, not to a proved mismatch between RG 1 records and actual stock. The demand on shortages and the case for treating excess stock as dutiable required proof of clandestine removal. The record did not show supporting evidence such as unaccounted raw material, abnormal power consumption, transport evidence, or receipt of extra consideration. Mere discrepancy figures, without corroboration, were insufficient to establish removal without duty.

Conclusion: The duty demand based on such discrepancies was not sustainable.

Issue (ii): Whether payment made by the assessee and the stock discrepancies were sufficient to shift the burden of proof onto the assessee.

Analysis: The payment made by the assessee was made to avoid litigation and was expressly stated to be without prejudice to the right to seek refund, so it did not amount to an admission of liability. The onus could shift to the assessee only after the Revenue first proved a discrepancy between RG 1 and actual stock and established a prima facie case of clandestine removal. That foundational proof was absent here.

Conclusion: The burden did not shift to the assessee, and the Revenue failed to establish its case.

Final Conclusion: The appeal failed because the Revenue did not prove clandestine removal with reliable corroborative evidence, and the impugned demand was therefore not upheld.

Ratio Decidendi: Duty cannot be confirmed on alleged stock discrepancies alone unless the Revenue first proves clandestine removal by cogent corroborative evidence; internal stock variations and voluntary payment without prejudice do not by themselves establish excisable liability.

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