Stock record mismatch alone cannot justify duty demand or credit denial without proof of clandestine removal or actual shortage.

Mere mismatch between RG-1 stock records, the balance sheet and Form 3CD report cannot sustain duty demand, Cenvat credit denial or penalty without proof of clandestine removal, actual shortage, or disposal of goods. The demand in issue rested only on theoretical stock differences, with no physical verification establishing shortage and no evidence that inputs or finished goods had left the factory. It was also noted that financial and excise stock accounting follow different methods, and the same issue had already been decided on similar facts in the assessee's favour.

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Issues: Whether duty demand and denial of credit could be sustained merely on the basis of differences between the RG-1 register, balance sheet and Form 3CD report, without evidence of clandestine removal or disposal of the alleged shortage.

Analysis: The demand was founded only on theoretical stock differences reflected in excise records and financial records. There was no physical verification establishing actual shortage, and no evidence that the alleged shortage of inputs or finished goods had been removed from the factory. The decision also noted that stock accounting under financial records and under excise records follows different methods, and that the identical issue had already been decided in the appellant's own case against the Revenue on similar facts.

Conclusion: Mere mismatch between RG-1, balance sheet and Form 3CD records, without proof of clandestine removal or actual disposal of goods, cannot justify duty demand, Cenvat credit denial, or penalty. The demand was rightly set aside in favour of the assessee.

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