Accidental leakage in approved storage premises does not attract excise duty where goods remain within the factory and are not removed.

Duty is not payable on molasses accidentally leaked from an approved storage tank within the factory, because the loss occurred by unavoidable accident in approved premises and no removal or consumption attracting excise levy was shown. Rule 49(1) of the Central Excise Rules, 1944, as applicable, exempts goods lost or destroyed by natural causes or unavoidable accident during handling or storage unless the proper officer concludes otherwise. On the stated facts, the leakage was admitted to be accidental and the goods remained within the factory, so remission was available and the duty demand was unsustainable.

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Issues: Whether duty could be demanded on molasses stored in an approved tank when the leakage occurred accidentally and the goods remained within the factory premises, and whether remission under the Central Excise Rules, 1944 was available.

Analysis: The goods were stored in approved premises and the leakage was admitted to be accidental. Under the first proviso to Rule 49(1) of the Central Excise Rules, 1944, duty is not payable where goods are lost or destroyed by natural causes or unavoidable accident during handling or storage in approved premises, unless the proper officer is satisfied otherwise. The demand was also unsustainable because there was no allegation that the molasses had been removed from the factory or consumed as such or for manufacture of another commodity; they had only leaked into an adjoining pit within the factory.

Conclusion: The duty demand was not sustainable and the appellant was entitled to relief.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Duty cannot be demanded on goods lost by accidental leakage in approved storage premises when the goods remain within the factory and there is no removal or consumption attracting excise levy.

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