Primary gold shortage computation must consider permissible wastage allowance before any demand is confirmed.

The shortage of primary gold was challenged on the ground that the stock verification did not account for the 9% wastage permissible on export of studded jewellery under the notification. The record showed imports, exports, gold recovered from dust, gold in stock, and findings and mountings in stock, but it did not demonstrate that the allowable wastage had been considered in computing the alleged shortage. The adjudicating authority was therefore required to re-examine the demand in light of the notification conditions and the assessee's relied-upon case law, after giving a hearing. The impugned order was set aside and the matter remanded for fresh decision.

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Issues: Whether the shortage of primary gold was correctly worked out without taking into account the 9% wastage allowable on export of studded jewellery under the notification.

Analysis: The stock verification memo referred to total imports, total exports, gold recovered from dust, gold in stock, and findings and mountings in stock, but it did not show that the permissible 9% wastage for studded jewellery had been considered while determining the alleged shortage. In view of this omission, the computation of shortage and the consequential demand required fresh examination by the adjudicating authority, along with the conditions of the notification and the case law relied upon by the assessee. An opportunity of hearing was also necessary before re-adjudication.

Conclusion: The impugned order was set aside and the matter was remanded for fresh decision on the demand after considering the notification conditions, the claimed wastage allowance, and hearing the assessee.

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