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Issues: (i) Whether remission of duty on molasses loss under Rule 21 of the Central Excise Rules could be denied merely because the claimed loss occurred over a short period, despite the claim being within the permissible limit. (ii) Whether duty could be recovered under Section 11A of the Central Excise Act in the absence of any allegation or finding of clandestine removal or removal without payment of duty.
Issue (i): Whether remission of duty on molasses loss under Rule 21 of the Central Excise Rules could be denied merely because the claimed loss occurred over a short period, despite the claim being within the permissible limit.
Analysis: Rule 21 permits remission where goods are shown to have been lost or destroyed by natural causes or unavoidable accident, and the Court treated the departmental approach as inconsistent with the governing legal position where the loss was assessed only by reference to the time span of the claim. The Court also relied on the earlier view that, in the absence of any contrary statutory restriction, remission cannot be refused solely because the loss occurred during part of the year, so long as the claim otherwise falls within the permissible limit and is referable to natural loss.
Conclusion: The denial of remission on the ground that the loss occurred in a short period was unsustainable and was set aside in favour of the assessee.
Issue (ii): Whether duty could be recovered under Section 11A of the Central Excise Act in the absence of any allegation or finding of clandestine removal or removal without payment of duty.
Analysis: Section 11A enables recovery where duty has not been levied, paid, short-levied, short-paid, or erroneously refunded, but the Court found that the show cause notices and the impugned orders contained no allegation or proof that the molasses had been clandestinely removed or removed without payment of duty. The burden to establish contravention lay on the department, and no presumption of clandestine removal could be drawn merely because the goods were not available in the premises. In the absence of a foundational allegation and finding, the duty demand could not be sustained.
Conclusion: The demand raised under Section 11A was held unsustainable and was set aside in favour of the assessee.
Final Conclusion: The remission refusals and consequential duty demands were quashed, and the writ petitions were allowed with no order as to costs.
Ratio Decidendi: Remission under Rule 21 cannot be denied merely because the loss occurred over a short period if the statutory conditions are otherwise met, and duty recovery under Section 11A requires a pleaded and proved basis such as clandestine removal or non-payment of duty.
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