Clandestine removal not proved where stock shortage alone was found and duty on the shortage had already been paid.

Shortage detected during stock taking did not, by itself, establish clandestine manufacture or removal without payment of duty. As the duty attributable to the shortage had already been paid in full, the record did not support maintaining the penalty at the level originally imposed. The penalty was therefore reduced to Rs. 10,000, while the remainder of the order was sustained.

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Issues: Whether, in the absence of direct evidence of clandestine manufacture and removal and in view of payment of duty on the shortage, the penalty imposed for shortage of finished goods and raw material warranted reduction.

Analysis: The shortage was noticed during stock taking, but there was no direct evidence of clandestine manufacture or removal without payment of duty. The duty attributable to the shortage had already been paid in full. In these circumstances, the material on record did not justify maintaining the penalty at the level imposed by the lower authority.

Conclusion: The penalty was reduced to Rs. 10,000 and the order was otherwise sustained.

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