Stock differences in common factory premises, capital goods credit, and limitation failed for lack of clandestine removal and suppression.

Stock differences found in contiguous, interconnected factory premises do not by themselves justify duty demand where shortage in one unit corresponds to excess in another and there is no proof of clandestine removal or suppression outside the common premises. Credit on the TBA packing machine was admissible because the machinery was declared for mixed use, was not shown to be used exclusively for exempted goods, and the credit scheme did not impose the time limit urged by the department. The extended limitation period could not be invoked absent positive suppression with intent to evade duty, so the demand was time-barred and the duty demand and credit disallowance were set aside.

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Issues: (i) Whether duty could be demanded on the alleged shortages and excesses found in different premises of the same factory; (ii) whether credit on the TBA packing machine was admissible; and (iii) whether the demand was barred by limitation.

Issue (i): Whether duty could be demanded on the alleged shortages and excesses found in different premises of the same factory.

Analysis: The dispute turned on whether the three registered units situated in contiguous premises with a common gate and interconnected production facilities could be treated as separate factories for the purpose of alleging removal based only on stock differences. The record showed that shortage in one unit corresponded to excess in another, that the units shared common facilities, and that the department had not established clandestine clearance or any objection to the approved ground plan. The absence of evidence showing removal outside the factory or suppression of goods beyond the common premises defeated the demand.

Conclusion: Duty could not be demanded on the alleged shortages and excesses; the finding was in favour of the assessee.

Issue (ii): Whether credit on the TBA packing machine was admissible.

Analysis: The credit dispute concerned capital goods received and installed when one intended final product was exempt, but where the assessee had also declared the machinery for use for dutiable production and later availed credit after the relevant product became dutiable. The machinery was not shown to have been used exclusively for exempted goods, the declarations were on record, and the governing credit scheme did not impose a time limit for availing credit in the manner contended by the department. The applicability of contrary precedents was held not to displace the factual position that the capital goods were intended for mixed use and were not confined to exempted manufacture.

Conclusion: Credit on the TBA packing machine was admissible; the finding was in favour of the assessee.

Issue (iii): Whether the demand was barred by limitation.

Analysis: The assessee was registered with the department, filing returns and declarations, and the controversy was one of legal interpretation rather than concealed facts. No positive act of suppression with intent to evade duty was established, and the material on record did not justify invocation of the extended period. On that basis, the notice was held to be beyond time.

Conclusion: The demand was barred by limitation; the finding was in favour of the assessee.

Final Conclusion: The appeals succeeded, and the duty demand as well as the credit disallowance were set aside with consequential relief according to law.

Ratio Decidendi: Stock differences within common and interconnected factory premises, without proof of clandestine removal, do not by themselves justify duty demand; capital goods credit is not deniable where the goods were not used exclusively for exempted manufacture and were intended for mixed use; and extended limitation cannot be invoked absent proved suppression with intent to evade duty.

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