Estimated stock shortage cannot sustain excise demand where minor variation and no clandestine removal are shown

Central excise duty demand based on stock discrepancy between physical stock and RG-1 was found unsustainable where the alleged shortage was only estimated and not the result of precise weighment. The Tribunal treated the Board's 2% variation guideline as a relevant benchmark, noted that variations in other years were below that level, and accepted that the overall loss was marginal. It also relied on earlier Tribunal precedent in the assessee's own case, which recognised practical stock-accounting difficulties in a steel plant and the absence of clandestine removal. The circular on condonation of losses during annual stock taking supported the view that minor differences should not justify duty demand.

---

---

Issues: Whether the demand of central excise duty based on stock discrepancy between physical stock and RG-1, treated as an estimated shortage, could be sustained.

Analysis: The discrepancy was examined as a matter of estimate rather than precise weighment, and the permissible 2% variation indicated by the Board was treated as a guiding norm. The record also showed that in other years the variation was below 2%, suggesting that the overall loss was minor. Reliance was placed on the Tribunal's earlier decision in the assessee's own case, where estimated shortages, practical difficulties in steel plant stock accounting, and the absence of clandestine removal were held sufficient to negate the demand. The circular on condonation of losses during annual stock taking reinforced that marginal differences in such cases deserve consideration.

Conclusion: The demand was not sustainable and the impugned order was set aside in favour of the assessee.

---