2003 (3) TMI 220 - AT - Central Excise

Appeal for Duty Remission on Molasses Shortage Dismissed

The Tribunal dismissed the appeal seeking remission of duty on a shortage of molasses attributed to storage loss. Despite the appellants' arguments citing ... Remission of duty - storage loss - burden of proof - dip method of measurement - condonation of storage loss up to 2% as per Board circular - principles of natural justiceRemission of duty - storage loss - burden of proof - dip method of measurement - condonation of storage loss up to 2% as per Board circular - Whether the claimed shortage of 3591.05 Qtls. of molasses constituted a storage loss entitling the appellants to remission of duty - HELD THAT: - The Tribunal found that although the total shortage was less than 2% of production (a threshold for condonation under the Board circular), the appellants failed to establish that the loss had occurred in storage due to natural causes as required by the proviso to sub-rule (1) of Rule 49. The stock in tank No. 2 had been measured by dip method on 24-8-98 (by department), on 28-10-98 (by department) and on 19-1-99 (by the appellants themselves); therefore the appellants could not now repudiate the dip method relied upon in earlier measurements. The shortage recorded on 28-10-98 (2390.41 Qtls.) formed part of the total 3591.05 Qtls.; the additional shortfall of about 1200.6 Qtls. occurred between 28-10-98 and 19-1-99 (under three months) and, given that this period was winter, could not be satisfactorily explained by evaporation or other natural causes. The Tribunal held that a bare assertion of natural loss was insufficient and that cogent evidence of storage loss was required but not produced by the appellants. The Bench also rejected reliance on a prior final order of the same Bench as the facts were not similar. [Paras 5, 6, 7]Claim for remission of duty in respect of the 3591.05 Qtls. shortage was not established and is rejected; the impugned order on this ground is affirmed.Principles of natural justice - Whether the Commissioner's rejection of the remission claim violated principles of natural justice for want of a show cause notice - HELD THAT: - The Tribunal observed that the question of violation of natural justice in the Commissioner's proceedings had already been considered and concluded in the remand order. Consequently the plea that no show cause notice was issued could not be entertained at this stage. [Paras 8]The plea of violation of natural justice for want of a show cause notice is not accepted.Final Conclusion: The impugned order rejecting remission of duty is affirmed and the appeal is dismissed. Issues:Claim for remission of duty on shortage of molasses due to storage loss. Violation of natural justice in rejecting the claim for remission.Analysis:1. The appellants, manufacturers of sugar and molasses, detected a shortage of 3591.05 Quintals of molasses in their steel tank No. 2 during the sugar season 1997-98. They applied for remission of duty under Rule 49 of the Central Excise Rules, 1944, attributing the shortage to storage loss, which was rejected by the Commissioner of Central Excise, leading to this appeal.2. The Chartered Accountant for the appellants cited CBEC Circular No. 261/15/82/CX. 8, stating that storage loss up to 2% in steel tanks could be condoned. The shortage found in the tank included a quantity detected earlier. The appellants argued that the entire shortage was due to natural causes like evaporation, pump/pipeline loss. They referenced previous decisions and a similar case where remission was allowed for a storage loss of less than 2%.3. The Chartered Accountant contended that the Commissioner violated natural justice by not issuing a show cause notice before rejecting the remission claim.4. The learned DR argued that the appellants failed to provide evidence of storage loss due to natural causes, supporting the Commissioner's findings and urging for dismissal of the appeal.5. The Tribunal noted that the shortage was less than 2% of the total production, which could be condoned as per the Board circular. However, it had to be determined if the shortage constituted a 'storage loss' under Rule 49. The appellants claimed natural causes for the loss, but the evidence did not support their case.6. The Tribunal found discrepancies in the appellants' arguments regarding the method of measurement and the unexplained shortage within a short period, questioning the credibility of their claim for storage loss due to natural causes. Lack of substantial evidence of storage loss further weakened their case.7. The Tribunal distinguished a previous case cited by the appellants, emphasizing the dissimilarity in facts and rejecting its applicability to the present case.8. Dismissing the plea of violation of natural justice, the Tribunal concluded that the Commissioner's proceedings were not unjust, as previously determined in the remand order.9. Ultimately, the Tribunal affirmed the impugned order, dismissing the appeal due to the lack of compelling evidence supporting the claim for remission of duty on the shortage of molasses attributed to storage loss.