Inadvertent stock non-accountal justified reduction of confiscatory fine and penalty, while shortage duty demand was left undisturbed.

Non-accountal of excess stock may warrant only limited confiscatory consequences where the lapse is shown to be inadvertent, consistently explained, and unsupported by material suggesting suppression or clandestine removal; on those facts, the fine and penalty were reduced as disproportionate to the breach. A shortage-based duty demand was not interfered with where the shortage was capable of explanation by weighment variation and the duty on that shortage had already been paid. The stated principle is that confiscatory fine and penalty must bear a reasonable proportion to the gravity of the offence, especially where mala fides are absent.

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Issues: (i) whether the fine in lieu of confiscation and the penalty imposed for non-accountal of excess stock were justified and required reduction; (ii) whether the duty demand on the shortage of electrical laminations called for interference.

Issue (i): whether the fine in lieu of confiscation and the penalty imposed for non-accountal of excess stock were justified and required reduction.

Analysis: The entries in the statutory records had not been made because the two storekeepers were stated to be suddenly ill, and that explanation was consistently maintained from the time of seizure. No material was brought to discredit their statements, and the surrounding circumstances did not indicate any intention to suppress production or clear goods clandestinely. In these circumstances, the breach was found to be unintentional and not actuated by mala fides. The fine and penalty were held to be excessive in relation to the gravity of the lapse.

Conclusion: The fine in lieu of confiscation was reduced from Rs. 25,000 to Rs. 1,000 and the penalty was reduced from Rs. 10,000 to Rs. 500, in favour of the assessee.

Issue (ii): whether the duty demand on the shortage of electrical laminations called for interference.

Analysis: The shortage was considered capable of being explained by weighment variation against a large stock position, but it was also noted that the duty on the shortage had already been paid by the assessee.

Conclusion: No interference was made with the duty demand on the shortage.

Final Conclusion: The adjudication was sustained on the duty aspect, but the confiscatory fine and penalty were substantially reduced because the lapse was treated as inadvertent and disproportionate to the gravity of the offence.

Ratio Decidendi: Where non-accountal is shown to be inadvertent and unsupported by mala fides, the quantum of confiscatory fine and penalty must bear a reasonable proportion to the gravity of the breach.

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