JUDGMENT K.L. Manjunath, J.—Revenue has come up in this appeal challenging the legality and correctness of the order passed by CESTAT in Final Order Nos. 1525 & 1526/2006 dated 19.9.2006 raising the following substantial questions of law: 1. Whether the CESTAT order is legal and correct in setting aside the impugned order No. 10/2004 dated 27.8.2004 on the ground that the discrepancy was only in SAP accounting and not in manual accounting? 2. Whether the CESTAT is right in holding that the manual accounts should prevail over accounts in electronic form, SAP in the present case? 3. Whether CESTAT is right in arriving at a decision when the value of the shortages was set off in their annual accounts as an expenditure? 2. Facts leading to this case are as hereunder: The respondent-assessee company is engaged in manufacture of various types of metal cutting tools, metal forming tools and machine tools falling under Chapter Sub Heading 8209, 8207 and 8466 respectively of the schedule to CETA 1985. Central Excise Intelligence Wing intercepted the respondent's premises on 12.5.2003. Certain documents were seized and the statements of responsible officers were also recorded. It was noticed that the assessee had failed to pay duty on finished goods found short to an extent of Rs. 56,09,485/-. 3. Assessee is maintaining accounts under SAP system. Each of its products are assigned with a product code, against each item manufactured an internal delivery note was raised for accounting in their SAP system as receipts to the finished goods stores and whenever any despatch was made the system automatically deducted the quantity and struck the balance based on delivery challans raised. Based on the actual stock in terms of SAP system, a show cause notice was issued on the ground that the assessee has failed to pay excise duty in respect of goods manufactured and removed. Revenue also noticed that there was a shortage of finished goods when it was compared to the actual stock. Respondent-assessee filed a detailed reply stating that difference in the stock either as excess or shortage was on account of SAP system of accounting and there is possibility of error being accrued in system of accounting and it further contended that the duty has been paid in respect of cleared goods, therefore assessee requested the authorities to drop the proceedings. 4. 4. Reply sent by the assessee was not accepted by the original authority. Thereafter, an order was passed calling upon the assessee to pay duty and penalty. Being aggrieved by the order, assessee filed an appeal before the tribunal. Revenue also filed a separate appeal in regard to the relief granted by the Commissioner in reducing the duty and penalty payable in terms of the payment made in the show cause notice. Both the cases were heard together. Tribunal after hearing the parties came to the conclusion that the adjudicating authority has come to the conclusion that the difference in regard to the excess or shortage would be about 2% and that no physical verification of stock was taken and on the ground that there may be chances of error in accounting system when the entire system is computerized and account is maintained under SAP system, accordingly appeal of the assessee was allowed and the appeal filed by the revenue came to be dismissed. Being aggrieved by the same, present appeal is filed by the revenue. 5. Counsel for the revenue contends that when the respondent-assessee is maintaining accounts electronically and manually, if there is any difference between the accounting system, it is for the assessee to explain and that the assessee was required to maintain the register in terms of the Central Excise Act and Rules. On account of non-following accounting system in terms of the Act and Rules, when there is a difference in the stock either as excess or shortage, authorities were justified in issuing a show cause notice and that the Commissioner without examining the case of the revenue and the assessee properly had given relief partially to the assessee and that the tribunal has also committed a similar error in granting relief to the assesses when the assessee has failed to maintain accounts in terms of the Central Excise Act and Rules. Therefore he requests the court to answer questions of law in favour of the revenue and against the assessee. 6. Therefore he requests the court to answer questions of law in favour of the revenue and against the assessee. 6. Per contra, counsel for the assessee contends that the assessee has given a detailed explanation for the discrepancy appeared in the accounting system and the commissioner has rightly noticed that in electronic method of accounting there may be an error either on plus side or on minus side and such error cannot exceed 2% and in the instant case actual difference of the goods manufactured found at the time of inspection based on the documents was not exceeding 2%, therefore he contends that the tribunal was justified in granting the relief and he further contends that the questions of law raised in the present appeal does not arise at ail as the actual dispute is based on the facts on account of the error occurred in electronic method of accounting. In the circumstances, he requests the court to dismiss the appeal. 7. Having heard the counsel for the parties, we have noticed chat the assessee is maintaining accounts in an electronic method which is known as SAP Accounting. It is also not in dispute that the physical verification of the stock has not been made by the revenue when the premises was intercepted. Whether really there was shortage in respect of certain items manufactured by it and whether there was excess stock when the premises was inspected is not known to the court. If the physical verification of the stock had been made manually, actual difference in the stock register maintained under the SAP system and the physical verification revenue would have known the actual difference in order to pass any order calling upon the assessee either to pay difference of duty and penalty. According to us, when the Commissioner has come to the conclusion that there was chances of error occurred in the SAP method of accounting, explanation offered by the assessee could not be ruled out easily by the authority either actual difference either excess or shortage was not more than 2%. In such circumstances, it was for the revenue to take physical verification. In such circumstances, it was for the revenue to take physical verification. As there is no actual physical verification, we are of the view that the questions of law raised in this appeal does not arise since at the end of the accounting system chances of error committing to an extent of 2% cannot be ruled out. 8. Accordingly, this appeal is dismissed.