Storage loss of molasses within tolerance limit defeats duty demand absent evidence of clandestine removal

Molasses shortage treated as storage loss, rather than clandestine removal, could not sustain a duty demand where no evidence supported evasion and the loss remained within the Board-prescribed tolerance limit of 2% of total stock. The article notes that the circular allowed condonation of duty for such storage losses, so the demand was unsustainable on the facts. It also rejects the argument that a separate application under Rule 147 was required, stating that the requirement was inapplicable in the circumstances described.

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Issues: Whether duty was payable on the shortage of molasses found in the storage tanks when the shortage was claimed as storage loss and was within the limit prescribed in the Board circular.

Analysis: The shortage of molasses was accepted as storage loss and not as clandestine removal. No evidence was produced to support the allegation of clandestine removal. The Board circular permitted condonation of duty on molasses lost in storage where the loss did not exceed 2% of the total molasses stored. Since the loss shown was below that limit, the demand could not be sustained. The contention that a separate application under Rule 147 was necessary was rejected as inapplicable on the facts.

Conclusion: Duty demand on the molasses shortage was unsustainable and the finding was in favour of the assessee.

Ratio Decidendi: Where molasses shortage is established as storage loss, remains within the Board-prescribed tolerance limit, and is unsupported by evidence of clandestine removal, duty cannot be confirmed.

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