Natural loss of excisable molasses was condonable; duty demand, penalty and interest could not be sustained.

Loss of excisable molasses arising from evaporation and handling during storage was treated as loss by natural causes, and no allegation of clandestine removal was made. The Tribunal applied the principle that such loss, where it falls within the condonable limit, need not be dealt with under a mandatory remission procedure. On the facts, the negligible 0.021% loss was held condonable, and the duty demand, penalty and interest could not be sustained. The contrary High Court ruling was distinguished on its facts, and the impugned order was set aside.

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Issues: Whether loss of molasses attributable to natural causes during storage and handling, and quantified at a negligible percentage of total production, was required to be assessed under the remission procedure and whether the loss was liable to be condoned.

Analysis: The loss related to the 2007-2008 sugar season and was only 0.021% of the total molasses produced. There was no allegation of clandestine removal of the allegedly lost quantity. The loss was explained as arising from evaporation and handling over time, which brought it within the category of natural causes. In those circumstances, the earlier view that remission procedure was mandatory for all losses was held inapplicable. The Tribunal applied the principle that loss on account of natural causes up to 2% is condonable, and distinguished the contrary High Court ruling on its facts.

Conclusion: The loss was condonable and the demand, penalty and interest could not be sustained.

Final Conclusion: The assessee succeeded in full, and the impugned order was set aside.

Ratio Decidendi: Loss of excisable goods caused by natural causes, when not accompanied by any allegation of clandestine removal and falling within the condonable limit, is liable to be condoned without sustaining duty demand.

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