IS tolerance in stock shortage disputes bars duty and penalty where shortages remain within the prescribed margin.

Stock shortages falling within the applicable IS tolerance standards were not treated as a basis for duty demand or penalty, because the verification figures remained within the prescribed tolerance range and the record did not show improper exclusion of that margin. The earlier finding that there was no evidence of clandestine removal was left intact, which also supported rejection of the duty, interest, and penalty proposal against the assessee company. The objection concerning the Director-related penalty issue did not succeed, as the appellate authority had not granted relief beyond the scope of the proceedings.

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Issues: Whether the alleged shortage of stock was liable to duty demand and penalty after applying the relevant IS tolerance standards, and whether the Revenue had any valid grievance against the treatment of the Director-related penalty issue.

Analysis: The stock verification figures showed shortages within the tolerance range prescribed by the relevant IS specifications. The departmental record did not establish that the shortage had been computed after properly accounting for the applicable tolerance, and the earlier finding that there was no evidence of clandestine removal remained undisturbed. The complaint regarding the Director-related aspect did not dislodge the conclusion that the Commissioner (Appeals) had not granted any relief on that issue beyond the scope of the proceedings.

Conclusion: The shortage was rightly treated as reconciled within IS tolerance, so no duty, interest, or penalty was sustainable against the assessee company. The Revenue's appeal failed.

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