1991 (6) TMI 154 - AT - Central Excise

Tribunal grants duty remission for destroyed goods under Rule 49, emphasizing compliance and notification.

The Tribunal allowed the appeals, setting aside the demands for duty and penalties imposed by the adjudicating authorities. It held that the appellants ... Loss or destruction of goods Issues Involved:1. Demand of Central Excise duty and imposition of penalty for removal of molasses in contravention of Central Excise Rules.2. Legitimacy of storage and destruction of molasses in open katcha pits.3. Applicability of Rule 49 of the Central Excise Rules regarding remission of duty for destroyed or unfit molasses.4. Validity of demands and penalties imposed by the adjudicating authorities.Issue-wise Detailed Analysis:1. Demand of Central Excise duty and imposition of penalty for removal of molasses in contravention of Central Excise Rules:The appeals challenged the orders of the Collector of Central Excise (Appeals) which upheld the demands for Central Excise duty and penalties imposed by the Assistant Collector. The adjudicating authority demanded duty on molasses allegedly removed without payment of duty in violation of Rules 9 and 49 of the Central Excise Rules, 1944, and imposed penalties under Section 173Q. The appellants contended that the molasses were not removed but stored in open pits within the factory premises with prior approval, which was later withdrawn suddenly. They argued that the molasses had deteriorated and become unfit for consumption due to natural causes, and thus, duty should not be demanded.2. Legitimacy of storage and destruction of molasses in open katcha pits:The appellants argued that the storage of molasses in katcha pits was approved by the Central Excise authorities since 1975, and the sudden withdrawal of this approval on 1-10-1982 left them with no alternative storage options. They claimed that the molasses deteriorated due to natural causes such as rain and floods, and were destroyed in the presence of State Excise authorities. The Tribunal noted that the appellants had produced documentary evidence, including certificates from State Government agencies, confirming the unfitness of the molasses for distillation and their destruction.3. Applicability of Rule 49 of the Central Excise Rules regarding remission of duty for destroyed or unfit molasses:The Tribunal emphasized that under Rule 49, duty cannot be demanded unless excisable goods are removed from the place of manufacture or storage. It clarified that liability to duty arises upon production, but the power to collect duty is triggered only when the goods are removed. The Tribunal referred to previous decisions, including those of the West and North Regional Benches, which held that molasses destroyed due to natural causes or found unfit for use should not attract duty. The Tribunal concluded that the appellants were entitled to remission of duty as the molasses were either destroyed or had become unfit for consumption due to natural causes.4. Validity of demands and penalties imposed by the adjudicating authorities:The Tribunal found that the demands and penalties imposed by the adjudicating authorities were not justified. It noted that the appellants had informed the State Excise authorities about the damage to the molasses and had produced evidence of destruction. The Tribunal observed that the Central Excise authorities had not disputed the destruction of molasses by the State authorities. It concluded that the demands for duty and imposition of penalties were not warranted, as the molasses were not removed in contravention of the rules but had deteriorated or were destroyed due to natural causes.Conclusion:The Tribunal allowed the appeals, setting aside the demands for duty and penalties imposed by the adjudicating authorities. It held that the appellants were entitled to remission of duty under Rule 49 as the molasses were destroyed or had become unfit for consumption due to natural causes. The Tribunal emphasized that the appellants had acted in compliance with the rules and had informed the relevant authorities about the condition of the molasses. Consequently, the appeals were allowed, and the appellants were granted consequential reliefs.