Stock variation and clandestine removal: small discrepancies in poor verification conditions did not sustain duty demand, penalty, or confiscation.

Stock discrepancy found during overnight verification was treated as a normal variation rather than proof of clandestine removal, because the appellant maintained very large inventory and the net difference was only about 4% of average stock. The Tribunal noted that counting took place in poor lighting and that errors could not be ruled out in those conditions. On that basis, the demand of duty, penalty and confiscation was held unsustainable.

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Issues: Whether the demand of duty, penalty and confiscation based on stock shortage and excess found during stock verification were sustainable.

Analysis: The Tribunal noted that the appellant carried very large stock volumes and the net discrepancy worked out by the department was only about 4% of average stock. It further noted that stock verification was conducted over night and continued in poor lighting conditions, with the result that mistakes or errors in counting could not be ruled out. In such business conditions, the discrepancy was treated as a normal stock variation and not as proof of any adverse intention or clandestine removal.

Conclusion: The demand, penalty and confiscation were not sustainable and the appeal was allowed.

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