Reasonable allowance for natural breakage under excise rules cannot be denied solely for lack of a breakage register.

Rule 223A of the Central Excise Rules required the proper officer to account for receipts and deliveries and to grant a reasonable allowance for waste by evaporation or other natural causes. That discretion had to be exercised reasonably in light of the normal course of manufacture and storage. On the facts, breakage of vacuum flask refills was a natural incident of the business, and refusal of any allowance merely because no day-to-day breakage register was produced was irrational, especially when no statutory provision required such a register. The demand raised on disallowance of breakage was therefore unsustainable and was set aside in favour of the assessee.

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Issues: Whether the excise authorities were bound to grant allowance for breakage of vacuum flask refills under Rule 223A of the Central Excise Rules and whether the demand raised on the footing that no day-to-day breakage account was maintained was valid.

Analysis: Rule 223A required the proper officer to take account of receipts and deliveries and to make such allowance for waste by evaporation or other natural causes as the proper officer may consider reasonable. The discretion conferred by the rule was not unfettered and had to be exercised reasonably, in accordance with the normal course of manufacture and storage. On the facts found, breakage of glass refills was a natural incident of the business, and it was irrational to refuse any allowance merely because no day-to-day breakage register was produced. The authorities also failed to point to any statutory requirement compelling maintenance of such a register. The refusal to grant any allowance showed non-application of mind to the statutory duty under Rule 223A.

Conclusion: The demand based on the disallowance of breakage was unsustainable and was set aside in favour of the assessee.

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