2013 (11) TMI 1388 - AT - Central Excise

Tribunal overturns order on duty evasion and excess stock due to insufficient evidence

M/s. Dhampur Sugar Mills Ltd. Versus CCE, Meerut-II

The tribunal set aside the order for the alleged illicit clearance of molasses without duty payment and excess stock in the factory. It found the evidence ... Clandestine removal of Molasses - Unaccounted stock of molasses – Lack of evidences – Held that:- The statements of the drivers have not been supplied to the appellant - Since there was no shortage of molasses in the appellant’s factory and on the contrary, there was excess quantity vis-`-vis the balance recorded in the RG-I register and since no samples from the stock of molasses seized from the tankers and from the stock of the molasses stored in the Appellant’s factory had been taken and tested, if cannot be said with certainty as to whether the molasses seized from the tankers was same as that which had been manufactured in the appellant’s factory. The department’s allegation that the molasses seized from the tankers had been clandestinely cleared by the appellant is not supported by any evidence - As regards excess stock of molasses in the appellant’s factory, the Appellant’s plea is that during summer season on account of heat, foam is generated in the tanks because of which the dip reading gets distorted - there is substance in the appellant’s plea – BAJAJ HINDUSTAN LTD. Versus COLLECTOR OF CENTRAL EXCISE, KANPUR [1994 (6) TMI 59 - CEGAT, NEW DELHI] - It cannot be said that there was excess unaccounted stock of molasses in the appellant’s factory, more so when the molsses is under physical control of the State Excise Authorities and no case had been booked in this regard by them against the appellant – order set aside – Decided in favour of Assessee. Issues: Alleged illicit clearance of molasses without duty payment; Confiscation of molasses and tankers; Imposition of penalties; Excess stock of molasses in factory.Alleged Illicit Clearance of Molasses without Duty Payment:The case revolved around the alleged illicit clearance of molasses without duty payment. Central excise officers intercepted tankers loaded with molasses coming from the appellant's sugar mill. The officers found discrepancies in the stock of molasses stored in the factory, leading to the seizure of molasses and tankers. The show cause notice issued sought confiscation of the molasses and penalties. The Joint Commissioner ordered confiscation and imposed penalties, a decision upheld by the Commissioner (Appeals).Confiscation of Molasses and Tankers:The Joint Commissioner's order confiscated the seized molasses and tankers, with an option for redemption on payment of fines. The penalties imposed on the appellant and drivers were also upheld by the Commissioner (Appeals). The appellant contested the basis of the allegations, arguing lack of evidence and discrepancies in the department's case.Excess Stock of Molasses in Factory:The appellant explained the excess stock of molasses in the factory as a result of distortion in dip reading due to foam formation in molasses caused by heat during the summer season. The appellant contended that there was no unaccounted excess stock, citing previous judgments allowing a 10% tolerance for foaming in determining the quantity of stored molasses. The appellant also highlighted that the molasses were under the physical control of State Excise Authorities, who had not taken any action against them.Analysis and Conclusion:The tribunal analyzed the evidence and arguments presented by both sides. It noted that the department's case relied solely on the statements of the tanker drivers, without providing these statements to the appellant as directed. The tribunal found no shortage of molasses in the factory and accepted the explanation for the excess stock due to foam formation. Without testing samples from the seized molasses and factory stock, the tribunal could not ascertain if the seized molasses came from the appellant's factory. The tribunal also referenced previous judgments regarding tolerance limits for foaming in stored molasses.In light of the lack of concrete evidence supporting the allegations of illicit clearance and excess unaccounted stock, the tribunal held that the impugned order was not sustainable. It set aside the order, allowing the appeal. The tribunal emphasized the importance of proper evidence and testing in such cases to establish the veracity of the allegations.