2004 (12) TMI 509 - AT - Central Excise

Summary

Issues: Duty demand and penalties based on shortage in stock taking.

Analysis:
1. Duty Demand and Penalties: The case involved a duty demand of Rs. 1,05,300/- and penalties of Rs. 1,06,000/- and Rs. 2000/- due to a shortage of about 280 qtls noted during stock taking in the appellant's molasses storage tank. Additionally, the appellant declared a shortage of 1826 qtls, leading to the duty demand and penalties being imposed.

2. Appellant's Explanation: The appellant argued that the quantity difference was due to evaporation and other natural reasons. Reference was made to a Board Circular advising condonation of storage loss up to 2%, with the appellant stressing that the shortage in this case was only at the rate of 0.2%. The appellant highlighted the absence of evidence supporting clandestine removal of goods and pointed out the possibility of error in dip reading contributing to the discrepancy.

3. Judicial Review: Upon reviewing the case records and hearing the arguments, the judge found no justification for the duty demand or penalties. It was noted that apart from the shortage observed during stock taking, there was no evidence indicating clandestine removal of goods. The judge emphasized that the shortage being well below the accepted limit of 2% due to natural causes, as per the Board Circular, rendered the impugned order unsustainable. Consequently, the judge set aside the order and allowed the appeal, ruling in favor of the appellant.