1976 (4) TMI 55

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....ducted a special stock taking at the warehouse of the accused on 8-1-1973 in accordance with the orders of the Collector of Central Excise, Madras and the Assistant Collector of Central Excise, Salem. The stock taking went on for two days and at the end it was found that there was huge shortage in the stock. The shortage noticed was 28,592 kgs. of tobacco which worked out to a total shortage of 81.54% in individual lots. The shortage noticed in individual lots ranged between 57.75% to 90.94%. The excise duty payable on the shortage noticed was Rs. 86,976. Since the shortage was far in excess of the percentage allowed by the Department for dryage, wastage etc., the departmental officers were of opinion that the accused should have clandestin....

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....the excise duty payable thereon was Rs. 86,976 I do not think that it is a correct view of the matter. P.W. 1 is a responsible officer of the department and it is rightly unlikely that he would have made any mistake in the process of stock taking or in assessing the shortage. 5.There are, however, other weighty factors which will stand in the way of the prosecution case being accepted. Firstly it has to be noted that the stock taking was begun on 8-1-1973. Though it was completed on 9-1-1973 P.W. 1 should have had knowledge even on 8-1-1973 that the stock of tobacco in the warehouse was short of the quantities noted in the registers and accounts. As such he would have had knowledge even on that day of the irregularity or illegality commi....

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..... 6.The other snag in the case is that under [Rule] 223(A) of the rules framed under the Act the warehouse keeper can be called upon by the Collector of Central Excise to account for any shortage of excisable goods and if the explanation offered by him was not acceptable he may be called upon to pay the full account of duty chargeable on the goods found deficient and also to pay penalty. Any action taken under [Rule] 223(a) of the rules framed under the Act will necessarily involve the Collector making an evaluation of the quantity of the loss sustained by the warehouse keeper on account of dryage, wastage etc. If the explanation is eventually accepted, then, it would follow that there had been no evasion of tax by the warehouse keeper a....