Per Shri V.P. Gulati - This appeal is against the order of the Collector of Central Excise, (Appeals) Hyderabad, under which the learned Collector (Appeals) while discarding the basis under which shortage was held against the appellant in the original authority's order has held that there was shortage to the extent of the quantum that could be carried in the bags which were found short in the factory.

2.Shri TK Seshadri, the learned Counsel for the appellant referring to the order of the original authority pointed out that the original authority had come to the conclusion that the appellant had not accounted for the quantity of 997.25 MT taking into consideration RG-1 Register entries and also the quantum as was physically ascertained by dip reading of the silos. He pleaded that shortage of bags was also found but no adverse finding had been entered against the appellant taking this shortage into account. The learned Counsel pleaded that the appellant had challenged the order of the original authority that the shortage worked out based on dip reading was not done properly for arriving at the quantum of cement available in the factory. He pleaded that the same plea was adduced by the appellant before the lower appellate authority and the Ld. lower appellate authority appreciated the appellant's plea and has held as under :

"The appellants contended that in such huge silos even a marginal error can result in a variation of 200 MTs in a silo. Since the Officers have not taken the dips of the required number in 3 silos it is quite possible that their estimation is wrong"

He pleaded that after having held that shortage ascertained by dip reading could not be basis for arriving at the quantum of cement removed clandestinely, he has gone on to say as under in his order:

"It has to be admitted that the Department has not adduced any evidence to prove illicit removal of Cement from the factory. Mere shortage of goods in the factory does not necessarily mean that the goods found short were removed without payment of duty even though such shortage lead to a strong suspicion. The Department mainly relied on two factors to allege the illicit removal of 977.250 MTs of cement. The first factor is that stock taking revealed that 997.250 MTs of cement was found short of the RG-1 balance. I have discussed earlier as to how this figure is arrived at. The methods adopted to arrive at the stock of cement that should be lying in the factory, were imperfect to say the least".

He pleaded that the lower appellate authority in his order has taken note of the shortage of bags and has held that quantum of cement which can be contained in the bag found short can be taken to have been removed without payment of duty. He pleaded that to say the least, there is apparent contradiction in the order of the lower authority. He pleaded that in any case the appellant was not put on notice in regard to the shortage of cement based on shortage of bags. He pleaded that the basis for arriving at the shortage was dip reading and once this has been given a go by the lower appellate authority, he has not laid any basis for holding that the shortage of bags could be taken to be indicative of the shortage of Cement. He pleaded that in this background, the impugned order may be set aside.

3. Shri JM Jeyaseelan, the learned DR pleaded that normally dip reading is the method adopted for arriving at the quantum of cement available in the factory. In case this method could not be relied upon, the learned lower authority has rightly taken into consideration the shortage of bags for arriving at the shortage of cementand he prayed for upholding the impugned order.

4. I have considered the pleas made by both the sides. I observe that proceedings were drawn against the appellant on the basis of dip reading of the silos based on which shortage of 997.250 MTs of cement was found and in respect of which duty was demanded. The original authority had also found that there was shortage in