Excess shrinkage alone cannot sustain duty demand without independent evidence of clandestine removal.

Demand of duty cannot be sustained merely because shrinkage or processing loss is alleged to be excessive; independent evidence of clandestine removal is required. In this dispute on grey fabric shrinkage, the appellate authority noted that shrinkage may vary from fabric to fabric and that the record contained no material beyond the alleged excess shrinkage to show removal without payment of duty. On that basis, the demand was not upheld and the Revenue's appeal was rejected.

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Issues: Whether demand of duty could be sustained merely on the basis of alleged excess shrinkage or processing loss, in the absence of any independent evidence of clandestine removal.

Analysis: The dispute concerned shrinkage in grey fabrics and the Revenue relied on the Board's circular to contend that shrinkage beyond the prescribed limit was impermissible. The adjudicating authority had confirmed the demand, but the appellate authority found that shrinkage may vary from fabric to fabric and that there was no evidence that the quantity attributed to shortage had been removed without payment of duty. The record disclosed no material apart from the alleged excess shrinkage to establish clandestine removal.

Conclusion: The demand could not be upheld solely on the basis of alleged excess shrinkage or excess processing loss, and the Revenue's appeal was rejected.

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