Marginal stock variation and no intent to evade duty meant confiscation and penalties could not stand.

Small stock variations in finished goods and raw material did not, on the facts, establish a real excess warranting confiscation or penalty. The marginal difference in aluminium ingots and scrap was capable of arising from genuine weighing or recording errors, while aluminium dross, ash and residue were generated in the manufacturing process, captively used, and covered by the duty exemption under Notification No. 67/1995-CE. In the absence of reliable evidence of clandestine clearance, non-accountal, or intent to evade duty, the alleged mala fide conduct was not made out. Confiscation and penalties were therefore held unsustainable and were set aside.

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Issues: Whether the small stock variations in finished goods, raw material, and aluminium dross, ash and residue constituted a real excess justifying confiscation and penalty; whether the facts disclosed any mala fide intention or intent to evade duty so as to sustain penalty on the company and its director.

Analysis: The excess in aluminium ingots and aluminium scrap was marginal when compared with the total stock and was capable of arising from genuine weighing or recording errors. The aluminium dross, ash and residue arose continuously in manufacture, was captively used, and was covered by duty exemption under Notification No. 67/1995-CE, which negatived any inference of mala fide non-accountal. In the absence of reliable evidence of real excess, clandestine clearance, or intention to evade duty, confiscation and penalty were not justified. The decision was supported by the principle that penalty requires deliberate conduct and not merely a technical or bona fide lapse.

Conclusion: The confiscation and penalties were unsustainable and were set aside in favour of the assessee.

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