Stock shortage duty demand sustained on verified weighment, while a private-document-based demand and penalty were rejected.

Duty demand on shortage of raw material was sustained where central excise officers verified stock in the presence of the assessee's representative, the assessee's own explanation supported the shortage, and the weighment method could not be discredited merely as eye estimation. The limitation plea also failed on the facts. By contrast, a separate demand founded only on a private document, along with the equal penalty, was set aside because the document and surrounding material did not provide a sufficient basis for confirmation.

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Issues: (i) Whether the demand of duty on shortage of raw material was liable to be set aside on the plea that the stock verification was based on eye estimation and that the demand was time-barred. (ii) Whether the demand raised on the basis of a private document and the equal penalty thereon were sustainable.

Issue (i): Whether the demand of duty on shortage of raw material was liable to be set aside on the plea that the stock verification was based on eye estimation and that the demand was time-barred.

Analysis: The stock of raw material was verified by central excise officers and the shortage was noticed in the presence of the respondent's representative. The respondent's own explanation showed that the material was received on metric tonne basis and issue was not correlated by actual weighment, which supported the departmental case. The method of weighment adopted during verification could not be discarded merely by calling it eye estimation, particularly when the finished goods tally was found correct and the weighment had been carried out as directed by the Director. The plea of limitation was also not accepted on the facts relied upon by the respondent.

Conclusion: The demand of duty on shortage of raw material was sustained and the challenge on limitation failed.

Issue (ii): Whether the demand raised on the basis of a private document and the equal penalty thereon were sustainable.

Analysis: The demand of Rs. 28,568/- was founded only on a private document. On the facts of the case, the alleged shortage was marginal and the document did not furnish a sufficient basis to sustain the demand and penalty. The materials on record did not justify confirmation of that part of the demand.

Conclusion: The demand based on the private document and the corresponding penalty were set aside.

Final Conclusion: The appeal succeeded only to the extent of the demand founded on the private document, while the duty demand on shortage of raw material was upheld.

Ratio Decidendi: A stock shortage demand can be sustained where verification is made by accepted weighment and the assessee's own records and statements support the shortage, but a separate demand resting only on a private document may be rejected for want of adequate sustainable basis.

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