Mandatory destruction procedure for warehoused excisable goods: non-compliance sustains duty demand, but penalty may still be set aside.

Destruction of warehoused molasses had to comply strictly with the prescribed excise procedure, including destruction in the presence of the proper excise officer or prior satisfaction for remission. Because the goods were destroyed only in the presence of State Excise officials and without shown intimation to or supervision by Central Excise authorities, the mandatory requirements were treated as unmet and the duty demand was restored. Although the duty liability survived, the surrounding facts were considered insufficient to justify penalty, and the penalty was set aside.

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Issues: (i) Whether the destruction of molasses complied with the mandatory procedure under the Central Excise Rules so as to defeat the duty demand. (ii) Whether the penalty imposed under the Central Excise Rules was sustainable.

Issue (i): Whether the destruction of molasses complied with the mandatory procedure under the Central Excise Rules so as to defeat the duty demand.

Analysis: The governing provision required destruction of unusable or unfit warehoused goods in the presence of an officer or satisfaction of the officer regarding permissible application for remission. The record showed that the molasses were destroyed in the presence of State Excise officials and not in the presence of Central Excise , and the Central Excise authorities were not shown to have been informed or to have supervised the destruction in the manner contemplated by the excise procedure. The earlier order cited by the respondent was distinguished on facts because, in that case, Central Excise authorities had been intimated and had issued certification. The procedural requirements were treated as mandatory.

Conclusion: The destruction did not comply with the required procedure, and the duty demand was rightly restored in favour of Revenue.

Issue (ii): Whether the penalty imposed under the Central Excise Rules was sustainable.

Analysis: Although the duty demand was upheld, the Tribunal considered the surrounding circumstances and found that imposition of penalty was not warranted on the facts.

Conclusion: The penalty was set aside, in favour of the assessee.

Final Conclusion: The duty demand survived, but the penalty was quashed, resulting in only partial success for the Revenue and corresponding relief to the assessee.

Ratio Decidendi: Destruction of warehoused excisable goods must strictly comply with the prescribed statutory procedure, and non-compliance with mandatory destruction requirements justifies restoration of duty demand, even if penalty is not ultimately sustained.

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