Excise demand survives despite notice by Superintendent and unexplained stock shortage of finished goods upheld for duty and penalty.

A show cause notice issued by the Superintendent did not vitiate the excise demand because Rule 9(2) required confirmation by the proper authority on adjudication, and the confirmed demand was made by the competent officer. The jurisdictional objection was rejected. The duty demand and penalty were also sustained on the factual finding of repeated, unexplained shortages of finished excisable goods during stock verification, as the explanation of approximate weighing and scrap storage was found unacceptable. The appeal therefore failed on both the authority challenge and the shortage-based demand.

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Issues: (i) whether a show cause notice issued by the Superintendent of Central Excise under Rule 9(2) of the Central Excise Rules, 1944 vitiated the demand proceedings; (ii) whether the demand and penalty could be sustained on the basis of shortage of finished goods found during stock verification.

Issue (i): Whether a show cause notice issued by the Superintendent of Central Excise under Rule 9(2) of the Central Excise Rules, 1944 vitiated the demand proceedings.

Analysis: Rule 9(2) contemplates a written demand by the proper officer, and the circular relied upon indicated the Assistant Commissioner as the proper officer for that purpose. The notice issued by the Superintendent was treated as only a show cause notice and not the confirmed demand contemplated by the rule. The confirmed demand arose only on adjudication by the competent authority, so the proceedings were not invalidated merely because the notice had been issued by the Superintendent.

Conclusion: The challenge to the demand on the ground of lack of authority in the issuance of the show cause notice was rejected.

Issue (ii): Whether the demand and penalty could be sustained on the basis of shortage of finished goods found during stock verification.

Analysis: The records showed repeated detection of substantial shortages of finished ingots on different dates, and the shortage remained unexplained despite opportunity. The explanation that the stock was only approximately weighed or lay under scrap was found unacceptable in view of the extent of shortage and the failure to reconcile the records after the first visit. The factual material supported the conclusion that the finished excisable goods were short and the departmental demand was justified.

Conclusion: The demand on account of shortage of finished goods, along with the penalty as sustained, was upheld.

Final Conclusion: The appeal failed on both the jurisdictional objection and the factual challenge to the shortage-based demand, and the impugned order remained undisturbed.

Ratio Decidendi: A notice issued by a lower excise officer does not vitiate the demand where the statute contemplates a confirmed demand by the proper authority on adjudication, and an unexplained shortage of finished excisable goods found on physical verification can sustain duty demand and penalty.

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