2009 (11) TMI 769 - AT - Central Excise

Tribunal confirms duty demand on molasses not used for cattle feed

SRI GANESH INDUSTRIES Versus COMMISSIONER OF C. EX., MADURAI

The tribunal confirmed the demand under Rule 196 of the Central Excise Rules on molasses not used for cattle feed manufacturing, reducing penalties on the ... - Issues:1. Confirmation of demand under Rule 196 of the Central Excise Rules, 1944 on molasses not used in the manufacture of cattle feed.2. Imposition of penalties on the company and its proprietor.3. Reduction of penalty by the Commissioner (Appeals).4. Evidence and findings regarding diversion of molasses and non-manufacture of cattle feed.5. Verification of electricity consumption and production records.6. Dual control by state excise officers and its significance in establishing actual manufacture.7. Upholding of demand under Rule 196 without challenge on the ground of limitation.8. Sustainability of separate penalty on the proprietor of a proprietary concern.Analysis:1. The judgment involves the confirmation of a demand under Rule 196 of the Central Excise Rules, 1944 on molasses not utilized for the manufacture of cattle feed. The Deputy Commissioner of Central Excise confirmed the demand on the company for procuring molasses under Chapter X but diverting it without using it for the intended purpose. The Commissioner (Appeals) upheld the duty demand, albeit reducing the penalty imposed on the company.2. Penalties were imposed on the company and its proprietor for the diversion of molasses and non-compliance with the manufacturing requirements. The penalty on the company was reduced by the Commissioner (Appeals), while the separate penalty on the proprietor was deemed unsustainable and set aside by the tribunal.3. The tribunal analyzed the evidence presented by the Department, which included discrepancies in the procurement and utilization of ingredients for cattle feed manufacturing. Statements from alleged purchasers of cattle feed and suppliers of rice bran were considered, along with discrepancies in electricity consumption compared to the claimed production levels of cattle feed.4. The judgment highlighted the importance of verifying electricity consumption and production records to determine the actual manufacturing activities of the company. Discrepancies in electricity usage raised doubts about the company's claimed cattle feed production, strengthening the Department's case against the company.5. The tribunal also discussed the significance of dual control by state excise officers in overseeing the procurement and release of molasses for cattle feed production. However, the lack of verification regarding the actual manufacturing process and consumption of molasses undermined the company's defense based on dual control.6. The tribunal upheld the demand under Rule 196 of the Central Excise Rules, emphasizing that the company failed to demonstrate the actual manufacture of cattle feed during the disputed period. The tribunal noted that the company did not challenge the demand on the grounds of limitation, further solidifying the duty liability.7. Ultimately, the tribunal upheld the impugned order concerning the company but deemed the separate penalty on the proprietor of the proprietary concern unsustainable. The appeal related to the company was rejected, while the appeal related to the proprietor was allowed, reflecting the tribunal's nuanced approach to the penalties imposed in the case.