Illicit removal from bonded warehouse governs duty treatment for tobacco shortages, not natural loss provisions.

Illicit removal of unmanufactured tobacco from a bonded warehouse was treated as a contravention of rule 151(c) and (d), not as a natural shortage. On that basis, the departmental view applied rule 9A(5) of the Central Excise Rules, 1944 to the clandestine removal, rather than rule 9A(4)(iii) governing loss. The amendment to rule 9A on 11-4-1981 was also regarded as not affecting the application of rule 9A(5) to earlier clandestine removals. The duty demand on the shortage was ultimately set aside and held not payable.

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Issues: Whether duty demand on shortage of unmanufactured tobacco found missing from a bonded warehouse was sustainable when the removal was found to be illicit and the governing rate was contended to be governed by the rule applicable to clandestine removals.

Analysis: The finding recorded by the lower authorities was that the shortage arose from contravention of rule 151(c) and (d), namely illicit removal from the warehouse, and not from natural losses. In such cases, rule 9A(5) of the Central Excise Rules, 1944 applied according to the departmental interpretation relied upon by the Tribunal, and there was no basis to treat the case as one of loss falling under rule 9A(4)(iii). The Tribunal also accepted the departmental view that the amendment of rule 9A on 11-4-1981 did not alter the applicability of rule 9A(5) to earlier clandestine removals.

Conclusion: The demand for duty on the shortage of 74,716 kgs. of unmanufactured tobacco was set aside and was not payable.

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