Remission of excise duty on destroyed goods turns on actual destruction and unfitness for consumption, though procedural breach may still attract penalty.

Where excisable goods are proved unfit for marketing or consumption and are actually destroyed, duty is not payable merely because some procedural requirement for remission was not fully observed; the duty demand on the destroyed molasses was therefore set aside. However, destroying the goods without prior permission of the excise authorities constituted a breach of the prescribed procedure, so penal action remained sustainable. The appeal succeeded only to the extent of deleting the duty demand, while the penalty was upheld as nominal.

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Issues: (i) whether duty was payable on molasses that had been destroyed by draining out after being found unfit for marketing and consumption; (ii) whether penalty was sustainable for destroying the goods without prior permission of the Central Excise authorities.

Issue (i): whether duty was payable on molasses that had been destroyed by draining out after being found unfit for marketing and consumption

Analysis: The goods were certified as unfit for marketing, the department was informed before destruction, and the molasses were in fact destroyed. On these facts, the substantive condition for remission under the excise rules was satisfied. Any defect in prior procedural compliance did not justify levy of duty on goods that had already ceased to be available as excisable goods.

Conclusion: The demand of duty on the destroyed molasses was not sustainable and was set aside.

Issue (ii): whether penalty was sustainable for destroying the goods without prior permission of the Central Excise authorities

Analysis: Although duty could not be demanded on the destroyed goods, the destruction had taken place without permission of the Central Excise authorities. That conduct was treated as a breach of the prescribed procedure warranting penal action, and the quantum of penalty was considered nominal.

Conclusion: The penalty was upheld.

Final Conclusion: The appeal succeeded only to the extent of deletion of the duty demand, while the penalty remained undisturbed.

Ratio Decidendi: Where excisable goods are proved to be unfit for marketing or consumption and are actually destroyed, duty cannot be demanded merely for breach of procedural requirements, though penal consequences may still follow for non-compliance with the prescribed procedure.

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