2007 (7) TMI 160 - HC - Central Excise

Court denies duty remission due to molasses shortage, sets limits on claimed losses.

The High Court dismissed the applicant's request for duty remission on the shortage of molasses, emphasizing the need for producers to substantiate ... Rejection of remission by Tribunal even when storage loss was with in condonable limit of 2 % - Held that, circular dated 6.2.82 merely sets out a guideline about the maximum amount of condonable storage loss – Producer is obliged to establish that loss could not be avoided – Remission disallowed. Issues:1. Remission of duty on shortage of molasses.2. Interpretation of Circular regarding storage loss.3. Applicability of Dip Method Measurement.Remission of Duty on Shortage of Molasses:The applicant, a manufacturer of molasses, faced a shortage in stock detected by the respondent-department. Initially suspected of 'clandestine removal,' the department dropped the proceeding due to lack of evidence. However, the applicant's request for duty remission on the shortage was rejected by the Tribunal. The applicant argued that the shortage was due to 'losses in storage' within the 2% limit set by a Circular of the C.B.D.T. The Tribunal rejected this, stating no evidence of natural causes was provided, especially during the winter season when a significant amount of molasses went missing. The High Court emphasized that the Circular did not guarantee a blanket 2% write-off for all producers, requiring producers to prove unavoidable losses despite precautions.Interpretation of Circular Regarding Storage Loss:The High Court clarified that the Circular's guideline on storage loss condonation did not absolve producers from proving actual unavoidable losses. The applicant's argument that the absence of 'clandestine removal' allegations implied storage loss was rejected. The Court stressed that producers must demonstrate, with evidence subject to examination by authorities, that claimed losses were genuine and unavoidable despite precautions. The Circular merely provided a maximum condonable limit, not an automatic entitlement.Applicability of Dip Method Measurement:Regarding the Dip Method Measurement, the Tribunal ruled that since the applicant previously used this method for stock measurement, challenging its validity when a shortage was detected was not acceptable. Consequently, the issue of the Dip Method's accuracy did not qualify as a legal question from the Tribunal's order. The High Court concluded that the Tribunal's decision was based on factual findings and did not raise any legal questions cited in the application, leading to the rejection of the applicant's plea.In conclusion, the High Court dismissed the applicant's request for remission of duty on the shortage of molasses, emphasizing the need for producers to substantiate claimed losses and the inapplicability of the Dip Method Measurement challenge as a legal issue.