Statutory remission prevails over a private bond; excise duty fails on destroyed, unfit molasses.

Excise duty could not be sustained on molasses that deteriorated in katcha pits merely because a special B-2 bond contained an undertaking not to claim remission; the statutory remission remedy under the excise rules remained available, and any contractual enforcement of the bond lay in civil court. Duty also did not survive where the molasses had become unfit for consumption or marketing and was permitted to be destroyed in accordance with the prescribed procedure, because the rule itself extinguished liability once destruction was lawfully authorised and completed. The duty demands and Collector's orders were therefore set aside.

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Issues: (i) Whether excise duty could be demanded on molasses that deteriorated in katcha pits despite execution of a special B-2 bond undertaking not to claim remission. (ii) Whether duty remained payable when the goods had become unfit for consumption or marketing and were permitted to be destroyed.

Issue (i): Whether excise duty could be demanded on molasses that deteriorated in katcha pits despite execution of a special B-2 bond undertaking not to claim remission.

Analysis: The same controversy had already been decided in an earlier common order involving identical facts. The governing principle applied was that a special bond cannot extinguish the statutory remedy of remission under the excise rules. The Tribunal also noted that, if the department wanted to enforce the bond as a contractual obligation, the proper forum was the civil court, not the adjudicating authority. In addition, the show-cause notices and findings did not establish the ingredients required for invoking the extended adjudicatory basis under the amended provision.

Conclusion: Duty demand on the strength of the special B-2 bond was not sustainable and the finding was in favour of the assessee.

Issue (ii): Whether duty remained payable when the goods had become unfit for consumption or marketing and were permitted to be destroyed.

Analysis: The relevant excise rule contemplated that duty need not be demanded on goods shown to have been lost or destroyed by natural causes or unavoidable accident, and also empowered the proper officer not to demand duty on goods claimed as unfit for consumption or marketing subject to conditions imposed by the Collector. Since the molasses had been permitted for destruction and had become unfit for use or sale, the liability could not survive merely because the department reserved its rights while granting permission. The rule itself operated to extinguish the duty liability once the prescribed procedure for destruction was followed.

Conclusion: No excise duty was payable on the destroyed molasses and the finding was in favour of the assessee.

Final Conclusion: The duty demands and the Collector's orders were set aside, and both appeals succeeded.

Ratio Decidendi: Statutory remission or non-demand provisions under the excise rules cannot be overridden by a private bond, and duty does not remain payable on goods lawfully found unfit for consumption or marketing and destroyed in accordance with the prescribed procedure.

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