Stock shortage of molasses not enough for duty demand where natural loss and no clandestine removal were shown.

Shortage detected during stock verification of molasses was not enough to sustain duty demand and penalties where the assessee explained the difference by evaporation, natural causes and dip reading error, and no evidence of clandestine removal was found. The Board circular recognising condonation of storage loss up to 2% for natural causes supported the explanation, and the reported shortage was stated to be below that level. On that basis, the demand and penalties were held unsustainable and were set aside.

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Issues: Whether duty demand and penalties were sustainable on the basis of shortage detected during stock verification of molasses, when the assessee claimed that the difference was due to evaporation, natural causes, and dip reading error, and when there was no evidence of clandestine removal.

Analysis: The shortage was found only on stock taking and there was no material to indicate clandestine removal of goods. The Board circular recognizing condonation of storage loss up to 2% on account of natural causes supported the assessee's explanation, and the shortage in the present case was stated to be well below that level. In these circumstances, the demand and penalties could not be sustained.

Conclusion: The duty demand and penalties were held unsustainable and were set aside.

Final Conclusion: The appeal succeeded, and the impugned order was quashed in full.

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