Molasses storage allegation failed: unsupported overflow claim and no clandestine removal meant duty demand and penalty could not stand.

Duty demand and personal penalty for alleged refilling of molasses after deterioration in storage were held unsustainable because the notice and adjudication lacked a clear factual foundation. The alleged overflow was unsupported by any physical verification report, no clandestine removal from the factory was established, and the assessee's explanation that deteriorated stock was being destroyed and that drying and seepage had created storage space was accepted. The alleged negligence under Rule 49 was also not substantiated, so the duty demand and penalty could not be maintained.

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Issues: Whether the demand of duty and penalty under Rule 9(2) could be sustained on the allegation that molasses stored in the pit had deteriorated, overflowed, and was thereafter refilled with fresh stock.

Analysis: The appellate authority found that the show-cause notice and the adjudication were not supported by a clear factual basis, that the allegation of overflow was not backed by any physical verification report, and that there was no clandestine removal from the factory. It also accepted the assessee's explanation that steps had been taken for destruction of deteriorated stock and that drying and seepage had created storage space for subsequent molasses. The finding of negligence under Rule 49 was also found unsubstantiated.

Conclusion: The demand of duty and the personal penalty were not sustainable.

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