Alleged shortage of finished goods needs cogent proof of clandestine removal; uncorroborated statements and denied cross-examination fail.

A duty demand based on alleged shortage of finished goods cannot be sustained without cogent evidence of clandestine removal. The production incharge's statement did not amount to an admission of shortage, and mere attestation of the panchnama did not establish acceptance of the alleged discrepancy. The partner's later statement also did not provide conclusive proof against the company. Cross-examination of the panch witnesses was wrongly declined even though their evidence was central to the allegation. In the absence of tangible corroboration, the revenue failed to discharge its burden, and the duty demand and consequential penalty were set aside.

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Issues: Whether the duty demand and penalty could be sustained on the basis of the alleged shortage of finished goods and the material relied upon by the revenue.

Analysis: The shortage was sought to be proved mainly from the panchnama and the statements of the production incharge and the partner. The statement of the production incharge did not amount to an admission of shortage, despite the revenue's reading of it, and mere attestation of the panchnama did not establish acceptance of the alleged shortage. The partner's statement, recorded later, also did not provide conclusive proof against the company. The request for cross-examination of the panch witnesses was declined on an erroneous premise, though their testimony was central to the allegation. In the absence of tangible evidence of clandestine removal, the alleged shortage could not justify confirmation of duty.

Conclusion: The duty demand and consequential penalty were not sustainable and were set aside in favour of the assessee.

Ratio Decidendi: A demand based on alleged shortage of goods must be supported by cogent evidence of clandestine removal, and where the relied-upon statements do not amount to an admission and cross-examination is wrongly denied, the burden on the revenue is not discharged.

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