Reliable weighment and corroborative evidence are essential to sustain a demand based on alleged clandestine stock shortages.

A demand founded on an alleged sponge iron shortage requires reliable weighment records and corroborative evidence establishing both the authenticity of physical verification and correct quantification. Where records omit truck details, weighment slips, and gross and net weights, the shortage and resulting demand are unsustainable. The notes also state that a show cause notice issued after the shortage was identified during stock-taking is unjustified where no further investigation or corroborative material concerning purported buyers was obtained before its issuance. The stated principle is that alleged clandestine shortages cannot support a demand without reliable underlying records and corroboration.

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Issues: (i) Whether the demand based on the alleged shortage of sponge iron was sustainable without reliable weighment records and corroborative evidence. (ii) Whether the show cause notice was issued after an unjustified delay when the alleged shortage was known on the date of stock-taking.

Issue (i): Whether the demand based on the alleged shortage of sponge iron was sustainable without reliable weighment records and corroborative evidence.

Analysis: The demand was founded entirely on the alleged shortage detected during physical stock verification. The records did not contain details of the trucks used, weighment slips, or the gross and net weights supporting the claimed weighment of approximately 963 MT. In the absence of such material, the authenticity of the weighment and the correct quantification of the shortage were not established.

Conclusion: The demand based on the alleged shortage was not sustainable.

Issue (ii): Whether the show cause notice was issued after an unjustified delay when the alleged shortage was known on the date of stock-taking.

Analysis: The alleged shortage was identified during stock-taking on 06.12.2007. No further investigation or corroborative material concerning the purported buyers was shown to have been gathered before issuance of the show cause notice. The delayed issuance was therefore unsupported by the record.

Conclusion: The delayed issuance of the show cause notice was unjustified on the facts found.

Final Conclusion: The alleged shortage and resulting demand were not established through reliable and corroborated evidence, and the challenged demand could not be sustained.

Ratio Decidendi: A demand founded on alleged clandestine shortage cannot be sustained where the underlying weighment and quantification are unsupported by reliable records and corroborative evidence.

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