Excise duty on molasses stored inside factory premises was unsustainable absent clearance of the goods.

Central Excise duty was not leviable on molasses stored in earthen pits within the factory premises because there was no evidence of clearance without accounting or payment of duty. The Tribunal treated the alleged revenue loss from storage in katcha pits as insufficient to create a duty liability, and noted that the notice relied on Rule 9A(5) of the Central Excise Rules, 1944 despite that rule not being in force in 2006. Following the principle that excise duty arises only on clearance of excisable goods, the demand and penalty were held unsustainable.

---

---

Issues: Whether Central Excise duty was leviable on molasses stored within the factory premises in earthen pits without clearance, and whether the resulting demand and penalty could be sustained.

Analysis: The molasses remained within the factory premises and there was no evidence of clearance without accounting or payment of duty. The goods were found unfit for marketing, and the demand was founded mainly on the alleged loss of revenue arising from storage in katcha pits. The Tribunal also noted that the notice invoked Rule 9A(5) of the Central Excise Rules, 1944, though the rule was not available in 2006. Relying on the binding principle that excise duty cannot be demanded in the absence of clearance of excisable goods, the Tribunal held that the facts were covered by the earlier High Court ruling on storage of molasses in earthen pits within the factory.

Conclusion: No Central Excise duty was payable on the molasses merely because it was stored in earthen pits within the factory, and the demand as well as the penalty could not be sustained.

---