Departmental custody of excise stamps defeated Rule 66 liability for alleged shortage and unsustained demand.

Rule 66 of the Central Excise Rules, 1944 did not apply to damaged and unserviceable excise stamps once they had been handed over to departmental officers and kept in rooms locked and sealed by the department. The liability under Rule 66 arose only where the manufacturer's own stamps remained in its custody and were found missing or unaccounted for. As the stamps were in departmental custody, and the alleged shortage was doubtful because of the long storage period and the circumstances of verification and re-verification, the conditions for recovery were not met. The demand for the alleged shortage could not be sustained.

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Issues: Whether Rule 66 of the Central Excise Rules, 1944 applied to damaged and unserviceable excise stamps that had been handed over to the department and kept under departmental lock and seal, and whether the appellant could be made liable for the alleged shortage.

Analysis: The damaged stamps were admitted to have been handed over to the departmental officers and stored in rooms locked and sealed by them. On those facts, the stamps were in the custody of the department and not in the custody of the manufacturer. Rule 66 fastened liability only when the stamps were the manufacturer's own stamps and were missing or unaccounted for while remaining in the manufacturer's custody. The allegation of shortage was also treated as doubtful in view of the long storage, the method of verification, and the circumstances of re-verification. In these circumstances, the conditions for recovery under Rule 66 were not satisfied.

Conclusion: The appellant was not liable for the alleged shortage, and the demand could not be sustained.

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