Stock discrepancy demands need proper verification; departmental penalty appeal below monetary limit was not maintainable.

Stock discrepancy and alleged clandestine clearance cannot be rejected as an afterthought where the assessee's explanation is supported by contemporaneous records such as RT-12 returns, ER-1 returns, RG-1 register and departmental stock verification material; on that basis, the duty demand required fresh factual verification and was remanded for reconsideration with personal hearing. The Revenue's challenge to deletion of a personal penalty was not maintainable because the penalty amount fell below the applicable departmental monetary limit, so the deletion remained undisturbed.

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Issues: (i) Whether the demand of central excise duty based on shortage of finished goods and alleged clandestine clearance could be sustained without properly examining the documentary explanation furnished by the assessee. (ii) Whether the Revenue's appeal against deletion of personal penalty of Rs. 1 lakh was maintainable in view of the monetary limit under the litigation policy.

Issue (i): Whether the demand of central excise duty based on shortage of finished goods and alleged clandestine clearance could be sustained without properly examining the documentary explanation furnished by the assessee.

Analysis: The assessee's explanation for the stock difference was supported by contemporaneous records, including RT-12 returns, ER-1 returns, RG-1 register and the departmental stock verification material. The rejection of that explanation as an afterthought, without proper verification of the documents already forming part of the record, was found to be unsustainable. The appellate authority also did not properly examine these materials. The dispute required fresh factual verification of the records and explanation.

Conclusion: The duty demand could not be finally sustained on the existing record and the matter was remanded to the adjudicating authority for fresh decision after verification and personal hearing.

Issue (ii): Whether the Revenue's appeal against deletion of personal penalty of Rs. 1 lakh was maintainable in view of the monetary limit under the litigation policy.

Analysis: The penalty involved was Rs. 1 lakh, which was below the monetary threshold of Rs. 10 lakhs prescribed in the applicable Board circular governing departmental appeals. On that basis, the appeal against the deletion of penalty could not be entertained.

Conclusion: The Revenue's appeal on the personal penalty was not maintainable and the deletion of the penalty was upheld.

Final Conclusion: The matter was sent back for fresh adjudication on the company-related demand, while the deletion of the personal penalty remained undisturbed.

Ratio Decidendi: Where a stock discrepancy is explained through contemporaneous records already forming part of the case record, the explanation cannot be rejected as an afterthought without proper verification, and a departmental appeal below the prescribed monetary limit is not maintainable.

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