Remission for molasses lost by natural causes prevails over bond-based duty recovery under excise rules.

Where excisable molasses stored in kaccha pits was lost, destroyed or deteriorated by heavy rain, flooding, spontaneous combustion, pit collapse or long storage, the Tribunal treated the damage as loss by natural causes and accepted remission where the goods were unfit for distillation or consumption. It further held that the Central Excise remission scheme controlled the field: duty could not be recovered merely on the basis of a B-2 bond or trade notice when the rules entitled the manufacturer to remission. Any separate enforcement of the bond was outside the excise adjudication. The result was rejection of duty recovery and acceptance of remission for natural loss or deterioration.

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Issues: (i) Whether the molasses lost, destroyed or deteriorated in the kaccha pits were shown to have been lost due to natural causes; (ii) Whether excise duty could still be recovered on such molasses on the strength of the B-2 bond and trade notice despite the scheme of remission under the rules.

Issue (i): Whether the molasses lost, destroyed or deteriorated in the kaccha pits were shown to have been lost due to natural causes.

Analysis: The evidence in the connected appeals showed loss by heavy rain and flooding, spontaneous combustion, collapse of pit walls, admixture of rain water, and long storage leading to deterioration. In several cases the departmental orders themselves recorded the occurrence of damage and, in the cases supported by laboratory or distillery certificates, the goods were proved to have become unfit for distillation. The finding of negligence was rejected where there was no contemporaneous investigation or condition imposed beyond the bond requirement.

Conclusion: The loss or deterioration in the allowed appeals was held to be due to natural causes.

Issue (ii): Whether excise duty could still be recovered on such molasses on the strength of the B-2 bond and trade notice despite the scheme of remission under the rules.

Analysis: The statutory scheme under the Central Excise Act and Rules recognises levy on manufacture, but collection is linked to removal, and remission is available where goods are lost or destroyed by natural causes or become unfit for consumption or marketing. Rule 49 was held to govern the field and to require a proper exercise of discretion on remission. The trade notice and the special bond could not override the statutory entitlement to remission, and the question of enforcing any such bond was not one for adjudication in the excise proceedings.

Conclusion: Duty recovery was held unsustainable in the appeals allowed by the Tribunal, and remission was held admissible; the departmental appeal was rejected.

Final Conclusion: The Tribunal allowed the assessees' appeals except the departmental appeal, set aside the adverse duty demands where natural loss or deterioration was established, and upheld remission for the destroyed or unfit molasses.

Ratio Decidendi: Where excisable goods are shown to have been lost, destroyed, or rendered unfit by natural causes, Rule 49 entitles the manufacturer to remission and departmental instructions or bonds cannot curtail that statutory discretion or defeat the scheme of the Rules.

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