Central excise duty on molasses lost in an accidental tank failure was unsustainable without removal from storage.

Central excise duty could not be demanded on molasses lost after the accidental bursting of a storage tank drain pipe because the goods were not removed from the place of storage. Rule 49 and Rule 9 contemplate duty liability on removal of excisable goods from the place of production or storage, and that essential condition was absent on the facts. The demand on the quantity lost was therefore not legally sustainable, and the issue was decided in favour of the assessee.

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Issues: Whether central excise duty could be demanded on molasses lost after accidental bursting of the drain pipe of the storage tank, when there was no removal of the goods from the place of storage, under Rule 49 and Rule 9 of the Central Excise Rules.

Analysis: Rule 49 and Rule 9 govern the time and manner of payment of duty and contemplate duty liability on removal of excisable goods from the place of production or storage. The molasses in question was not removed but was lost when it was destroyed after the tank drain pipe burst. In these circumstances, the essential condition for invoking the demand under the said rules was absent. The claim for duty on the quantity lost was therefore not legally sustainable.

Conclusion: The duty demand was unsustainable and the issue was decided in favour of the assessee.

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