Transit loss of export goods may not justify duty where shortage is minor, disclosed, and no diversion or fraud is shown.

Export of cement clinker under LUT with a declared shortage was treated as a case of transit loss or natural loss, not a taxable diversion. The Tribunal noted that the shortage was minor, was reported to the department, and was not accompanied by any allegation of fraud, clandestine removal, or other positive act of removal. Relying on precedent accepting transit loss of cement clinker and remission where no wrongful removal was shown, it was stated that mere inability to prove export of the short quantity did not justify duty demand on that shortage. The duty demand was therefore unsustainable.

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Issues: Whether duty was payable on the shortage of cement clinker declared for export under LUT when the shortage was claimed to have occurred due to transit loss or natural causes.

Analysis: The export goods were cleared under LUT and the shortage was duly declared to the department. The shortage was minor and there was no allegation of diversion, fraud, or clandestine removal. The Tribunal noted that judicial precedent had accepted transit loss of cement clinker as a natural loss and had granted remission where no positive act of removal was shown. In such circumstances, failure to produce proof of export for the short quantity did not by itself justify confirmation of duty on the shortage.

Conclusion: The demand of duty on the short quantity was held to be unsustainable and the assessee's appeal was allowed.

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