Jyoti Balasundaram, Vice-President

1. Duty demand of Rs. 3,99,500/- together with interest and penalty of equal amount have been challenged by the Assessees in the present appeal.

2. The demand has been confirmed on shortage of sugar detected in the factory of the Assessees. The lower authorities have also confiscated 4700 quintals of sugar seized from the Assessees with an option of redemption on payment of a fine of Rs. 3,50,000/-.

3. We have heard both sides. The Assessees have satisfactorily explained the entire shortage and excess as seen from their written statement in which they have stated that out of the total difference in quantity of 7280 quintals, as alleged by the department, 5139 quintals were brought from the Pudukottai go down to the factory and the movement is supported with gate register, 2141 quintals was the stock available at Pudukottai go down and out of 5139 quintals, 2559 quintals were physically present in the factory as confirmed in the verification report and the remaining 2580 quintals were reprocessed and removed from the factory under cover of invoices. Since the entire quantity is satisfactorily explained, the duty demand cannot be sustained and it is accordingly set aside. The confiscation of goods is also set aside in view of the above. However, the Assessees are liable to penalty for contravention of the Rules. Having regard to the totality of the facts and circumstances of the case, we reduce the penalty to Rs. 2,000/- (Rupees two thousand only).

4. The appeal is thus partly allowed in the above terms.

(Dictated and pronounced in open court)