Unreliable stock verification and no proof of clandestine removal meant duty demand, confiscation, and penalty could not be sustained.

Stock verification was found unreliable because the initial count was completed very quickly and later revised substantially on re-verification, while the remaining shortage was minor and could be explained by breakage or similar normal causes. In the absence of independent, tangible evidence of clandestine removal or duty evasion, the duty demand could not be sustained. The excess stock was also not shown to be ready for dispatch, and the quantity dispute weighed against confiscation. Accordingly, confiscation and personal penalty also failed.

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Issues: Whether the duty demand, confiscation, and penalty could be sustained on the basis of shortages and excess stock found during stock verification, including goods not entered in the RG-1 register.

Analysis: The stock verification itself was found to be unreliable, as the initial counting of a very large quantity of bottles was completed in a short span and was later revised substantially on re-verification. The remaining shortage was small and could reasonably be attributed to breakage or similar normal causes. There was no independent positive or tangible evidence to show clandestine removal of goods without payment of duty. As regards the excess stock, the goods were not shown to be ready for dispatch, and the dispute regarding quantities also weighed against confiscation. In the absence of proof that the goods were liable to immediate confiscation or that duty evasion had been established, the demand and penalty could not survive.

Conclusion: The duty demand, confiscation, and personal penalty were set aside, and the appeal succeeded.

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