Permissible stock loss in molasses tanks defeats duty demand and penalty when shortage stays within board norms.

Duty demand and penalty for alleged molasses shortage were held unsustainable where the stock figure was reworked on the basis of tank calibration accepted by the Weights and Measures authorities, reducing the apparent shortage. Even on the higher computation, the shortage was only 1.62% and fell within the loss norm permitted by the Board circular. The deficiency was treated as attributable to natural causes rather than unexplained removal or excess loss, and the demand and penalty were set aside in favour of the assessee.

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Issues: Whether the demand of duty and penalty could be sustained on the alleged shortage of molasses found in the appellant's tank, where the appellant claimed that the quantity had been wrongly computed and that the shortage, even on the higher figure, remained within the permissible loss norm under the Board circular.

Analysis: The quantity recorded at stock taking was examined against the calibration of the tank, which was accepted by the Weights and Measures authorities. On that basis, the appellant's computation showing a substantially lower shortage was accepted. Even on the higher figure, the shortage was only 1.62%, which was within the loss permitted by the Board circular. The shortage was treated as arising from natural causes rather than any enforceable excess removal or unexplained deficiency.

Conclusion: The duty demand and penalty were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded because the alleged shortage was not sufficient to justify duty liability or penalty on the facts found.

Ratio Decidendi: Where a stock shortage is shown to be attributable to accepted calibration-based computation and remains within the permissible loss norm, no duty demand or penalty can be sustained merely on the basis of the apparent deficiency.

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