Per Shri Gowri Shankar :

This appeal is against the order of the Additional Commissioner of Central Excise in which he found that there was a difference between the stock recorded in the RG1 register and the stock physically verified of the various types of ball bearings 'manufactured by the appellant, and thereafter proceeded to confiscate the excess with an option to redeem, demand duty on the shortage and imposed a penalty on the appellant.

2. Before we proceed to deal with the arguments in this appeal, it is necessary tonarrate the events which took place prior to the verification of the stock. On the 17th March 1990, Central Excise officers visited the assessees factory and took stock of the bearings manufactured by it. These were about 25 in variety. The officers found that there was shortage in some types of the stock, when compared with the stock that ought to have been present, going by the RG1 register, and excess in some others. The officers in accordance with the normal practice, seized the excess and also the RG1 register. In order to ensure that the assessee continued to maintain its accounts, they again in accordance with normal procedure, certified the stock as verified by them, entered it in a fresh register and gave it to the assessee to maintain accounts. Notice issued is with regard to the shortage on 17th March was confirmed by the Deputy Commissioner. This order was set aside by the Commissioner (Appeals) on the ground that it lacked jurisdiction. This has been carried in appeal to the Tribunal, and is pending decision. We are not concerned with those proceedings.

3. The budget for 1990-91 was presented on 20th March 1991. The appellant was required, in accordance with the provisions of Rule 223B, to furnish a statement of the stock of finished goods on the day preceding budget day i.e. 19th March. As the 19th March was a weekly holiday for the appellant's factory on account of power staggering by the Electricity Board it gave to the office on the evening of 18th March the stock data of the finished goods as at 5 p.m. on that day.

4. The officers visited the appellant's factory on the morning of 20th March and proceeded to compare the physical stock which they found with the stock as stated in the declaration given on the 18th March. They found that they tallied. They however found that the stock in hand did not tally with the stock as declared there was excess in some RG1 items and shortages in other items. Therefore they seized the excess stock. In due course notice was issued demanding duty on the shortage, proposing confiscation of the excess and imposition of penalty. After hearing the appellant the Additional Collector has passed orders confirming duty and imposing penalty. Hence this appeal.

5. It is the contention of the advocate of the appellant that there was in reality, no shortage or excess found on the 20th March. He says that on the 18th March, the stock was verified by the appellant's staff and the result communicated in the declaration filed to the department. The Additional Collector has admitted that there is no difference between the quantities in this declaration and the quantity found on the 20th. Therefore he says the difference is actually the quantity as specified in the RG1 register on 17th March and the quantity which the appellant had declared on the 18th. According to him this happened because the appellant did not accept as correct the stock that the officers had found on the 17th. At the same time it did not specifically set out anywhere that it did not accept the correctness of the stock. Therefore he says there was no shortage and the Additional Collector's order has to be set aside. He seeks to support this contention by saying that no finished bearings were produced or cleared between the two visits of the officers on the evening of the 17th and 20th March. The factory was closed on the 19th. He contends that the Additional Collector, in order to support his view that the