Continuous manufacturing and incomplete stock verification cannot justify confiscation or duty demand without corroborative evidence of clandestine removal.

In a continuous manufacturing process, confiscation of finished goods cannot be sustained on an inference of clandestine removal where inspection occurs during ongoing production and quality testing or stock accounting is still incomplete, especially without corroborative evidence. The seized Polyester Film was therefore treated as part of in-process manufacture and its confiscation was set aside. A duty demand based on alleged shortage of Polyester Chips also failed because the verification was incomplete, the quantities in silos and process lines were not properly accounted for, and the estimated shortage was found unreliable and vague. The resulting order was annulled with consequential relief.

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Issues: (i) Whether confiscation of the seized Polyester Film as unaccounted finished goods was justified. (ii) Whether the duty demand on the alleged shortage of Polyester Chips was sustainable.

Issue (i): Whether confiscation of the seized Polyester Film as unaccounted finished goods was justified.

Analysis: The seized film formed part of the appellant's continuous round-the-clock production and the inspection began during the course of ongoing manufacture. The goods were at a stage where quality testing and further accounting in the stock records were yet to be completed. The adverse inference of clandestine removal was not supported by corroborative evidence.

Conclusion: The confiscation of the Polyester Film was not justified and was set aside.

Issue (ii): Whether the duty demand on the alleged shortage of Polyester Chips was sustainable.

Analysis: The alleged shortage was worked out without proper measurement of the chips stored in silos and without accounting for quantities lying in the silos and in process lines. In a continuous manufacturing process, the estimated shortage based on incomplete verification was found to be unreliable and vague.

Conclusion: The duty demand on the alleged shortage of Polyester Chips was not sustainable and was set aside.

Final Conclusion: The appeal succeeded in full and the impugned order was annulled with consequential relief.

Ratio Decidendi: In a continuous manufacturing process, confiscation or duty demand cannot rest on unverified assumptions or incomplete stock verification in the absence of corroborative evidence of clandestine removal.

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