Excise duty remission on deteriorated molasses where goods became unfit for marketing and duty demand failed.

Remission of excise duty was warranted on molasses that had deteriorated and become unfit for marketing. The analysis notes that the loss had occurred, the goods had developed a foul smell, and the deterioration was mainly due to non-lifting by the distilleries. On that footing, the second proviso to Rule 49(1) of the Central Excise Rules, 1944 enabled the proper officer to waive duty on goods claimed as unfit for consumption or marketing, subject to conditions imposed by the Commissioner. Once the goods were found unfit for marketing, the basis for demanding duty on the disputed quantity did not survive, and the demand was unsustainable.

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Issues: Whether remission of duty was admissible on molasses that had deteriorated and become unfit for marketing, and whether duty could still be demanded for the balance quantity under Rule 49(1) of the Central Excise Rules, 1944.

Analysis: The Commissioner had recorded that the loss had occurred and that the molasses had deteriorated, resulting in a foul smell, and that the deterioration was mainly due to non-lifting by the distilleries. In such circumstances, the second proviso to Rule 49(1) empowered the proper officer not to demand duty on goods claimed as unfit for consumption or marketing, subject to conditions imposed by the Commissioner. Since the goods were found to be unfit for marketing, the basis for demanding duty on the disputed quantity did not survive.

Conclusion: Remission of duty was warranted and the demand for duty on the molasses was unsustainable; the appeal was allowed in favour of the assessee.

Ratio Decidendi: Where goods are found to have deteriorated and become unfit for marketing, duty cannot be demanded if the statutory proviso permits remission on that ground.

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