Clandestine removal not proved where lubricating oil shortage stayed within tolerance and duty demand failed.

Duty could not be demanded on alleged shortage or wastage in lubricating oil repacked by the respondent because the shortage was within the permissible tolerance range and was covered by the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and the input-output norms declared under the Exim Policy 2002-2007. No material showed that the disputed quantity was used in the manufacture of final products and cleared without payment of duty. In the absence of evidence of clandestine manufacture or removal, the duty demand was not sustainable and the Revenue's appeal was rejected.

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Issues: Whether duty could be demanded on the basis of alleged shortage or wastage in lubricating oil repacked by the respondent, in the absence of evidence of clandestine manufacture and removal.

Analysis: The shortage was within the permissible tolerance range and was covered by the Standards Weights and Measures (Packaged Commodities) Rules, 1977 as well as the input-output norms declared under the Exim Policy 2002-2007. No material showed that the disputed quantity was used in manufacture of final products and cleared without payment of duty. In the absence of evidence of clandestine removal, the demand could not be sustained.

Conclusion: The duty demand was not sustainable and the Revenue's appeal was rejected.

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