Unexplained stock shortages sustain excise duty demand when verification is credible and shortages of excisable goods remain unaccounted.

Unexplained shortages detected during factory stock verification, supported by a detailed panchnama, weighment and the participation of the authorised representative, justified confirmation of central excise duty demand. The Tribunal accepted that the shortage of finished goods and inputs was real because it was not satisfactorily explained, and the later voluntary debit of duty reinforced that conclusion. The argument that the shortages were insignificant in percentage terms did not negate the finding that identifiable excisable goods were short. Reduced penalties were also sustained, as the verification method was credible and the cited authorities were factually distinguishable.

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Issues: Whether the demand of central excise duty on shortages detected during factory stock verification, along with the reduced penalties, was liable to be interfered with.

Analysis: The stock verification was conducted on the basis of a detailed panchnama and weighment, with the appellant's authorised representative participating in the exercise and signing the verification report. The shortage of finished goods and inputs was not satisfactorily explained. The subsequent voluntary debit of duty on the detected shortages and the absence of any credible objection to the method of verification supported the finding that the shortage was real. The contention that the shortages were insignificant as a percentage of total stock did not displace the finding that identifiable excisable goods were found short. The Tribunal also noted that the authorities relied upon by the appellant were factually distinguishable, while the principle emerging from the Revenue's cited authority was that, where shortage of finished goods remains unexplained, the method of clandestine removal need not be separately proved.

Conclusion: The demand of duty and the reduced penalties were upheld, and no interference was called for.

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