Molasses stock variation cannot by itself prove clandestine removal; duty, confiscation and penalties were set aside.

Excess molasses stock detected by dip method was treated as a normal stock variation attributable to foam factor and storage conditions, especially where the State Excise authority had accepted the recorded stock in the statutory register and later endorsed the net excess balance at season-end. On that factual foundation, the allegation of clandestine removal was found to rest only on assumption and presumption without adequate evidence. The duty demand, confiscation and penalties were therefore held unsustainable and were set aside by CESTAT in favour of the assessee.

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Issues: Whether the demand of duty, confiscation and penalties could be sustained on the basis of alleged excess molasses stock found by dip method, when the State Excise authority had accepted the recorded stock and later endorsed the net excess in the tanks.

Analysis: The variation detected on the date of inspection was treated as a normal variation in molasses stock, having regard to the foam factor and the conditions of storage. The State Excise authority, being in physical control of production, storage and dispatch of molasses, had accepted the recorded stock in the statutory register and later acknowledged the net excess balance at the end of the season. In these circumstances, the conclusion of clandestine removal was held to rest only on assumption and presumption, without adequate factual foundation.

Conclusion: The duty demand, confiscation and penalties were not sustainable and were set aside in favour of the assessee.

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