Unexplained shortage of excisable inputs, supported by an admitted statement and weak retraction, justified duty demand and penalty.

Unexplained shortage of excisable inputs was found during inspection, and the assessee's explanation that part of the stock was in another unit and the balance had been issued for manufacture was not supported by statutory records. A statement recorded under section 14 of the Central Excise Act, admitting the shortage and debiting the duty, was relied upon, and the later retraction after five days was found unexplained. On that basis, the duty demand and penalty were sustained and the challenge failed.

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Issues: Whether the demand and penalty were sustainable where shortage of inputs was found, and whether the appellant's explanation and later retraction of statement displaced the adverse inference.

Analysis: Shortage of 507.850 kgs. of inputs was found on visit. The explanation that part of the quantity was lying in another unit and the remainder had been issued for manufacture was not supported by statutory records. The statement recorded under Section 14 of the Central Excise Act admitting the shortage and debiting the duty was accepted, and the retraction after five days was found unexplained.

Conclusion: The appeal was held to be without merit and the demand and penalty were sustained against the appellant.

Final Conclusion: The challenge to the adverse order failed and the revenue's case was upheld.

Ratio Decidendi: Unexplained shortage of excisable inputs, supported by an admitted statement and unsupported by statutory records, justifies sustaining the duty demand and penalty.

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