Allegations of clandestine removal must be supported by tangible corroborative evidence such as production capacity, raw material procurement, and electricity consumption. Third-party documents are insufficient for establishing such charges without independent verification and compliance with statutory requirements for cross-examination of witnesses.

Per Ashok Jindal :

The appellants are in appeal against the impugned order wherein demand of duty has been confirmed against the appellants and an equivalent amount of penalty has also been imposed on the appellant-company and a penalty of Rs.3.00 Crores has been imposed on the Director of the appellant-company.

2. The facts of the case are that the appellant was engaged in the manufacture of TMT Bars as a conversion agent of Steel Authority of India in terms of the agreement entered into with the SAIL on 16.06.2011. In terms of the said agreement for wet-leasing, the appellant had offered their total capacity for undertaking production of goods for SAIL and the appellant was not entitled for producing any goods for any other persons. The said agreement also provides for supplying the quantity of materials after allowing percentage of material loss. The said contract also provides that the activities of the appellant would be monitored by the representative of SAIL. In respect of scrap, the appellant was entitled for clearing the same on payment of duty. Since the appellant had offered the total mill capacity of M/s. SAIL, they would not produce and sale of the said product under its banner or for any other buyers agency. As per te said agreement, M/s. SAIL was supplying billets to the appellant and the appellant was manufacturing TMT Bars in their factory and clearing the finished goods as TMT Bar as per the direction of M/s. SAIL or to any other depots of SAIL as per direction of SAIL. The representatives of SAIL was also posted at the factory of the appellant to look after the manufacturing activity and/or quality control aspect and/or inward & outward movement of raw materials and finished goods as well as consumable properties. There was no scope for manufacture of any unaccounted goods and clearance thereof to any other person in view of the said agreement and the contract. No dispute was raised by the department at any point of time till the officers of the department visited their factory on 14.08.2014.

2.1 The officers of the department visited on 14.08.2014 the appellant factory premises, office premises and the premises of Shri Joydev Karmakar working under loading and unloading contractor and recovered some note books and loose documents. The officers did not undertake stock verification. There was also no allegation from SAIL in respect of unauthorized manufacture and clearance of some quantities of goods to any other buyers. The representatives of RITES on behalf of M/s. SAIL also did not make any complaint. There was no evidence in respect of procurement of inputs from any other sources, no buyer was identified, no statement was taken from any buyer or transporter or driver or owner of vehicle wholly relying upon the entries in some note books or in loose papers containing rough entries of vehicle numbers, quantity etc. Clandestine clearance of goods have been inferred and the appellant was made to deposit an amount of Rs.50 lakh on 14.08.2014 itself, wholly on the basis of the entries in the third party documents i.e. the note books maintained by Shri Joydev Karmakar, a labour/employee of loading and unloading contractor. During the curse of inspection, the statement of Shri Joydev Karmakar was recorded on 14.08.2014 & 20.10.2014. In his statement, he stated that he was maintaining the accounts of loading and unloading as per order of one Shri Mukesh Chowdhury and on the basis of which, Mukesh Chowdhury was getting payment from the appellant. The appellant also procured billet not only