Stock discrepancy alone cannot prove clandestine removal or sustain duty demand without independent evidence of excess clearance.

Stock variation at a stockyard, by itself, was held insufficient to sustain duty, interest, or penalty where the alleged excess clearances from steel plants were not independently proved. The demand rested only on annual stock verification showing excess quantities of some products and shortages of others, but no evidence established actual unaccounted removal without payment of duty. The discrepancy could equally arise from weighing differences, product mix-up, or handling errors. On that basis, the demand and penalties were set aside and the appeal succeeded.

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Issues: Whether duty demand and penalties could be sustained solely on the basis of stock-taking discrepancies at the stockyard, and whether the alleged excess clearances from the steel plants were proved.

Analysis: The duty demand was founded entirely on annual stock verification at the stockyard, which showed excess quantity in respect of some products and shortages in respect of others. The discrepancy was not shown to be the result of actual unaccounted clearance from the plants. The variation could arise from differences in weighing scales, product mix-up, and similar handling-related causes. Where the entire case rests on such stock-taking records, without proof that the plants had in fact cleared the alleged excess quantity without payment of duty, the presumption of duty liability cannot be sustained.

Conclusion: The demand of duty, interest, and penalty was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned order was annulled because stock variation alone was held insufficient to establish clandestine removal or duty evasion.

Ratio Decidendi: Mere discrepancy between goods shown as received and goods shown as sold in stock records, without independent proof of actual excess clearance without duty, is insufficient to sustain a duty demand or penalty.

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