Tribunal overturns duty demand and penalty for alleged shortage of piezos due to lack of verification process

The appellate tribunal set aside the duty demand of Rs. 74,490 and penalty of Rs. 10,000 imposed on the appellants for an alleged shortage of piezos. The tribunal found the demand unsustainable as it did not consider breakage during manufacturing or verify the broken piezos in stock. It concluded that the demand lacked a proper basis and verification process, leading to the appeal being allowed.

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Issues: Duty demand for shortage of piezo, penalty imposition.

Duty Demand for Shortage of Piezo:
The case involves a duty demand of Rs. 74,490 due to an alleged shortage of 1,10,011 pieces of piezo. The appellants argue that they used duty paid and non-duty paid piezo for gas lighter manufacturing. During stock taking, no physical shortage was observed. The department issued a notice based on total receipts, quantity issued for manufacturing, and gas lighters produced. The appellants claim the shortage resulted from natural breakage during manufacturing, estimated at about 6.39% over the period. They requested verification of broken piezos stock, which the department failed to do. The appellants contend duty credit need not be reversed for normal breakage during manufacturing.

Penalty Imposition:
The adjudicating Commissioner confirmed the duty demand and imposed a penalty of Rs. 10,000. However, the appellate tribunal found the demand unsustainable as it was calculated without considering breakage or verifying broken piezos in stock. The tribunal set aside the impugned order and allowed the appeal, indicating that the demand lacked a proper basis and verification process.

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