B.2 bond and tacit approval do not bar molasses relief under Rule 49 and Rule 49A

Execution and acceptance of a B.2 bond for molasses stored in kuchha pits did not by itself extinguish relief under the provisos to Rule 49 and Rule 49A of the Central Excise Rules. The Government treated the bond arrangement, together with the surrounding facts, as capable of amounting to tacit departmental approval for the storage method for that limited purpose. It also accepted the factual position that loss by natural causes and quantities found unfit for consumption were entitled to relief, subject to verification of State approval of the loss. The review challenge therefore failed, and the appellate relief in favour of the assessee was maintained.

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Issues: Whether the loss or destruction of molasses and the quantity found unfit for consumption were entitled to relief under the provisos to Rule 49 and Rule 49A of the Central Excise Rules, and whether execution of a B.2 bond negated that claim.

Analysis: The proceedings arose from review under Section 35EE of the Central Excise Act. The order records that the assessees had sought approval to store molasses in kuchha pits, were required to execute a B.2 bond, and that such execution did not by itself take away the claim under the provisos to Rule 49. The accepted bond arrangement, together with the surrounding facts, was treated as sufficient to infer tacit departmental approval for the storage arrangement for the purpose of the proviso. The Government also noted the agricultural and seasonal character of the commodity and the co-operative nature of the factory. On the factual question of loss by natural causes and goods unfit for consumption, the Assistant Collector had recorded no contrary finding despite the Collector (Appeals) having accepted the explanation, and the Government accepted that conclusion, subject to verification of State approval of the loss.

Conclusion: The claim for relief under Rule 49 and Rule 49A was accepted, and the review challenge failed; the order in appeal was upheld in favour of the assessee.

Ratio Decidendi: Execution and acceptance of a B.2 bond in relation to molasses stored in kuchha pits does not extinguish relief otherwise available under the provisos to Rule 49, and departmental acceptance of the arrangement may amount to tacit approval for that limited purpose.

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