Stock shortage verification supported duty demand, but penalty was reduced and personal penalty under Rule 209A was deleted.

Shortage of marble slabs found during stock verification supported a duty demand because the measurements were taken in the presence of concerned persons and the verification report recorded individual slab dimensions and quantity in cubic metres. The assessee's explanation did not displace those findings, so the duty demand was upheld. On penalty, the text states that the maximum penalty under Section 11AC was not mandatory in every case; the company's penalty was therefore reduced to Rs. 8,000. The personal penalty on the authorised signatory under Rule 209A was set aside because the record did not establish a sufficient factual basis for fastening liability.

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Issues: (i) Whether the demand of duty on account of shortage of marble slabs found during stock verification was sustainable; (ii) whether the penalty imposed on the assessee-company required reduction; (iii) whether the penalty imposed on the authorised signatory under Rule 209A was sustainable.

Issue (i): Whether the demand of duty on account of shortage of marble slabs found during stock verification was sustainable.

Analysis: The quantity of marble slabs was measured by the employee of the assessee-company in the presence of the concerned persons, and the stock verification report recorded the dimensions of individual slabs and worked out the quantity in cubic metres. The record did not establish that the entire stock was accepted as merely approximate, and the explanation offered did not displace the verification findings.

Conclusion: The demand of duty on account of shortage of marble slabs was upheld against the assessee-company.

Issue (ii): Whether the penalty imposed on the assessee-company required reduction.

Analysis: Although the shortage-based duty demand was sustained, the penalty was found to be excessive on the facts of the case. The maximum penalty permitted under Section 11AC was not regarded as mandatory in every case, and a lesser penalty was considered sufficient to meet the ends of justice.

Conclusion: The penalty on the assessee-company was reduced to Rs. 8,000/- in total.

Issue (iii): Whether the penalty imposed on the authorised signatory under Rule 209A was sustainable.

Analysis: The material on record did not justify fastening penalty on the authorised signatory in the circumstances of the case. The requisite basis for imposition of such penalty was not made out on the facts found by the Tribunal.

Conclusion: The penalty imposed on Shri Natwar Gehlot was set aside.

Final Conclusion: The duty demand was confirmed, but the company's penalty was reduced and the personal penalty on the authorised signatory was deleted, resulting in partial relief to the assessee side.

Ratio Decidendi: A penalty under Section 11AC need not invariably be imposed at the maximum limit where the facts justify a lesser punishment, and penalty under Rule 209A cannot be sustained without a sufficient factual basis connecting the to the infringing conduct.

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