Stock shortages based solely on eye estimation cannot justify CENVAT credit denial or penalties without corroborative evidence.

Denial of CENVAT credit and consequential penalties cannot rest solely on a stock shortage estimated by visual inspection during physical verification. The verification record lacked item-wise details and evidence of actual weighment of pipes and tubes of different dimensions, while the claimed verification within approximately ten hours disclosed no reliable methodology. In the absence of concrete corroborative evidence of clandestine manufacture or removal, an alleged shortage based only on eye estimation could not support the demand. The article notes that the denial of credit and penalties was set aside.

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Issues: Whether denial of CENVAT credit and consequential penalties could be sustained solely on an alleged stock shortage determined by eye estimation during physical verification.

Analysis: The stock-verification record did not contain item-wise bifurcation or details establishing actual physical weighment of pipes and tubes of varying dimensions. The claimed verification of a substantial quantity within about ten hours was not supported by a reliable methodology. A shortage founded only on eye estimation, without concrete corroborative evidence of clandestine manufacture or removal, could not sustain the demand.

Conclusion: The alleged shortage determined on eye estimation was unsustainable; the denial of CENVAT credit and penalties were set aside in favour of the assessee.

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