Stock discrepancy alone cannot prove clandestine removal or sustain confiscation, duty demand, interest, and penalties.

Mere stock discrepancy or non-entry in records does not, by itself, justify confiscation, duty demand, interest or penalty without positive evidence of clandestine removal. Where the goods and scrap remained inside the factory, regular stock and business records existed, and the discrepancy was marginal and capable of explanation by weighing, estimation or stock-taking errors, confiscation and related demands cannot be sustained. In the absence of corroboration such as buyer or transporter involvement, flow back of funds, or other material showing clandestine clearance, stock variation alone is insufficient to establish evasion.

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Issues: Whether confiscation of excess goods and truck, demand of duty and interest on shortage, and penalties on the assessee were sustainable in the absence of positive evidence of clandestine removal.

Analysis: The stock discrepancy was found on physical verification, but the records and panchnama showed that the assessee maintained regular stock and business records, which were resumed by the department. The discrepancy in copper pipes was marginal, and the excess and shortage could reasonably arise from weighing differences, estimation errors and stock-taking errors. The goods in question were lying within the factory premises and there was no evidence of removal, buyer or transporter involvement, flow back of funds, or any other corroborative material showing clandestine clearance. The same approach applied to the scrap, which was found inside the factory and was linked to the manufacturing process. In these circumstances, confiscation, redemption fine, duty demand and penalty could not be sustained merely on the basis of stock variation.

Conclusion: The confiscation, duty demand, interest and penalties were not sustainable and were set aside.

Final Conclusion: The appeal succeeded, and the adjudication based only on stock differences was overturned for want of evidence of clandestine removal.

Ratio Decidendi: Mere stock discrepancy or non-entry in records, by itself, does not justify confiscation, duty demand or penalty unless supported by positive evidence of clandestine removal, especially when the goods remain within the factory premises.

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