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1. Admit.

2. The petitioner is a company incorporated under the Companies Act, 1956. It engaged inter alia in the manufacture of motor vehicle parts and accessories falling under Tariff Item No. 34A of the Central Excise Tariff.

3. In the annual stock taking conducted by the first respondent (Assistant Collector of Central Excise, Madras-II Division) in the petitioner company in the year 1981 certain alleged shortages and excesses were noticed. Consequent to this detection of shortages, the first respondent issued a show cause notice to the petitioner company on 25-5-1983 calling upon them to shows cause as to why duty on shortages in Pistons, Rings, Gudgeon Pins totalling about Rs. 2,16,681.94 should not be demanded under Rule 223-A of the Central Excise Rules, 1944 and further calling upon the petitioner as to why a penalty should not be imposed on the petitioner under Rules 223-A and 226 of the Central Excise Rules. The petitioner filed a reply on 25-5-1983 stating inter alia that the demand made by the first respondent was carried under the provisions of Section 11-A of the Central Excise Act. It was further contended that the discrepancies noticed were only due to wrong entries posted in their accounts and due to human error in physical handling. The petitioner requested that the show cause notice be dropped as the alleged shortages could be set off against the excess in respect of similar products. After a personal hearing the first respondent by order dated 24-8-1984 held that the petitioner was liable to pay Duty of Rs. 1,60,623.12 and further imposed a penalty of Rs. 2,000/- under Rule 223-A of the Central Excise Rules.