Duty demand for excisable shortage upheld, but confiscation and penalty set aside for insufficient proof of liability.

A shortage of excisable goods in a bonded store room justified a duty demand, and the belated retraction of the clerk's statement did not displace the contemporaneous verification record. The demand was not invalid merely because the exact sum was left for later working, though the adjudicating authority should have stated the applicable rate and confined the remaining exercise to arithmetic quantification. By contrast, confiscation of thirty drums found in the finishing room and the penalty under the excise rules were set aside because the record did not establish with sufficient certainty that the goods were fully manufactured and liable to confiscation, and doubt was resolved in favour of the assessee.

---

---

Issues: (i) Whether duty was payable on the five drums found short in the bonded store room and whether the demand could be sustained when the exact amount was left to be worked out by the proper officer; (ii) Whether confiscation of the thirty drums of plasticisers found in the finishing room and the penalty imposed under the excise rules were sustainable.

Issue (i): Whether duty was payable on the five drums found short in the bonded store room and whether the demand could be sustained when the exact amount was left to be worked out by the proper officer.

Analysis: The explanation for the shortage was rejected. The belated affidavit retracting the clerk's earlier statement did not displace the original statement recorded at the time of verification. The claimed leak-and-transfer explanation was also found unsupported by contemporaneous conduct. On the question of quantification, the demand was not invalid merely because the exact sum was not specified in the notice or order, but the adjudicating authority ought to have indicated the applicable rate and left only the arithmetical working to the proper officer.

Conclusion: Duty on the five drums was payable and the demand was upheld, but the amount had to be quantified by the adjudicating authority.

Issue (ii): Whether confiscation of the thirty drums of plasticisers found in the finishing room and the penalty imposed under the excise rules were sustainable.

Analysis: The record did not establish with sufficient certainty that the thirty drums were fully manufactured goods liable to confiscation. The goods were found within the factory premises in the finishing section, and the explanation that they had not yet undergone testing was not decisively disproved. In the circumstances, the benefit of doubt was extended on this aspect.

Conclusion: Confiscation of the thirty drums and the penalty imposed under Rule 173Q were set aside.

Final Conclusion: The liability to duty on the shortage of five drums was sustained, but the confiscation of the unaccounted drums and the higher penalty were annulled, resulting in a partial allowance of the appeal.

Ratio Decidendi: A shortage of excisable goods can justify a duty demand even if the notice or order does not state the exact amount, but confiscation and penal consequences require sufficient proof that the goods were duly liable to such action.

---