Excise duty on stored goods depends on actual removal; deterioration or destruction alone does not create liability.

Excise duty on molasses kept in approved storage was held to arise only on actual removal from the place of manufacture or storage, not merely on production or continued presence in storage. Where the goods deteriorated due to rain, flood, long storage, or were destroyed under State Excise supervision, and there was no reliable evidence of clandestine or unauthorised removal, duty and penalty were not sustainable. The Tribunal treated removal as a positive act that cannot be equated with disappearance, deterioration, or destruction by natural causes, and granted relief by setting aside the demands and penalties.

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Issues: Whether demand of central excise duty and penalty on molasses was sustainable when the goods were alleged to have deteriorated or been destroyed in storage and no proven removal from the approved premises was established.

Analysis: The appeals concerned molasses stored in katcha pits which had deteriorated due to rain, flood, long storage, or had been destroyed under the supervision of State Excise authorities. The Tribunal held that under the scheme of Rule 9 and Rule 49 of the Central Excise Rules, 1944, excise duty becomes recoverable only when excisable goods are removed or issued out of the place of manufacture or approved storage. Mere production does not by itself create a liability to pay duty at that stage, and removal is a positive act which cannot be equated with disappearance, deterioration, or destruction by natural causes. The Tribunal also found that the evidence from State authorities supported the assessee's case and that there was no reliable material to show clandestine or unauthorised removal of the molasses.

Conclusion: The demand of duty and the penalty were not legally sustainable, and the assessee succeeded on this issue.

Final Conclusion: The common result was that all the appeals succeeded, with the duty demands and penalties set aside and consequential relief granted.

Ratio Decidendi: Excise duty on goods kept in storage cannot be demanded unless there is actual removal from the approved place, and destruction or deterioration of the goods by natural causes, without proof of clandestine removal, does not amount to removal attracting duty or penalty.

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