Excise duty on destroyed molasses not leviable where storage loss resulted from accidental internal combustion

Excise duty under Rule 49(1) of the Central Excise Rules, 1944 was chargeable on removal of goods from the factory, and not on molasses that were destroyed in storage by internal combustion and became burnt, non-marketable mass. The evidence supported accidental destruction during storage, so the proviso for loss or destruction not shown to arise from natural causes or unavoidable accident did not justify the demand. The duty demand on the destroyed balance quantity was unsustainable, while duty already paid on the quantity actually cleared from the factory remained undisturbed.

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Issues: Whether excise duty was payable on molasses that had undergone auto-combustion and been destroyed while stored in factory tanks, and whether the manufacturer was disentitled to exemption because the loss was alleged to have resulted from negligence.

Analysis: Rule 49(1) of the Central Excise Rules, 1944 made duty payable on excisable goods only on removal from the factory, and its proviso permitted duty to be demanded where goods were not accounted for or where loss or destruction was not shown to have occurred by natural causes or unavoidable accident during handling or storage. The evidence showed that the molasses stored in the tanks had decomposed due to internal combustion and had become burnt molasses, unfit for consumption and non-marketable. The fact that similar combustion did not occur in other tanks did not negate the occurrence of accidental destruction in the tanks in question. The demand, therefore, could not be sustained on the theory that the goods had not been lawfully removed or that the alleged combustion was attributable to negligence so as to defeat the proviso.

Conclusion: Excise duty was not leviable on the destroyed balance quantity of burnt molasses, and the petitioner succeeded on this issue.

Final Conclusion: The impugned revision and the connected orders were set aside, while duty already paid on the quantity of black mass that had actually been cleared from the factory was left undisturbed.

Ratio Decidendi: Excise duty is chargeable on removal of goods, and goods lost or destroyed during storage by accidental internal combustion are not liable to duty where the destruction is shown to be due to natural causes or unavoidable accident within the meaning of the governing rule.

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