TaxTMI 
TaxTMI 
2015 (10) TMI 2613
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....as they are from a common Order-in-Appeal. 2. The brief facts of the cases are that the applicant are engaged in the manufacture of Sugar and Molasses. On 27th April, 2008 at about 21.00 Hrs, the steel tank No. 5 of Molasses in the applicant's factory had burst out. They had submitted intimations to the department that 60980.65 Quintals of molasses had been stored in the steel tank No. 5 at the time of bursting; that a quantity of 21125.25 Quintals of molasses remained in the tank No. 5 and 573.20 Quintals of molasses was collected and dispatched after recovering it from open field and drains. The total loss of molasses was, thus, worked out as 39,282.40 Quintals. The Additional Commissioner, Central Excise, Meerut-I issued a show cause notice dated 22-4-2009 alleging therein as to why : - (i) An amount of Rs. 30,34,566/- should not be demanded and recovered under Section 11A of Central Excise Act, 1944; (ii) A penalty should not be imposed upon under Rule 25 of the Central Excise Rules, 2002; (iii) An interest at applicable rate should not be demanded under Section 11AB of Central Excise Act, 1944. The applicant....
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....as penalty is dependent on quantity of duty liability. 4.1.3 That the same view was taken in TTK Pharma v. CCE - 2000 (117) E.L.T. 320 (Tribunal) that penalty under Rule 25 cannot be imposed unless duty payable is quantified. That there is no dispute on quantification and payment of duty, hence the penalty under Rule 25 of Central Excise Rules, 2002 appears to be mandatorily imposable on the applicant. 4.1.4 That the said Order-in-Appeal does not appear to be legal and proper for not imposing penalty under Rule 25 of Central Excise Rules, 2002. 4.1.5 That the Central Government may modify the Order-in-Appeal to the extent of imposing penalty under Rule 25 of Central Excise Rules, 2002, or may pass such order as deemed fit. 4.2 Grounds in respect of F. No. 195/286/12-RA filed by the applicant : 4.2.1 That the Commissioner (Appeals) passed the impugned order without appreciating the facts and the legal provisions with respect to demand of duty on molasses lost admittedly due to bursting of the tank and as such the impugned order is bad in law and the same is not maintainable. 4.2.2 That the Commissioner (Appeals) failed to appreciate that the duty ....
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....isions of Rules 4, 6 and 8 of Central Excise Rules, 2002. Consequently, the entire demand confirmed by the appellate authority on the ground of violation of provisions of Rules 4, 6 and 8 is not sustainable in law. 4.2.4 That the appellate authority failed to appreciate the judgment cited by the applicant in their Appeal Memo in the case of Kisan Sahakari Chini Mills v. CCE, Allahabad - 2007 (208) E.L.T. 234 (Tri.-Delhi). In that case, the drain pipe of steel tank had burst and as a result of molasses stored in the tank were drained off. The adjudicating authority directed the assessee to pay central excise duty due on the molasses lost and the demand was sustained under Rules 9 and 49 of Central Excise Rules, 1944. The Hon'ble Tribunal held that Rule 49 stipulates that payment of duty shall not be required until the goods are about to be issued out of place of manufacture/storage. Rule 9 stipulates that no excisable goods shall be removed from the place of production/storage without payment of duty. Since, the molasses drained off were destroyed and were not available for removal, the Hon'ble Tribunal held that there was no violation of Rules 9 and 49 of Central Excise Rules....
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....eciding the matter after decision of Hon'ble CESTAT on the remission claimed by the applicant. 4.2.8 That following the past practice, the Commissioner (Appeals) ought to have either kept the appeal in abeyance or alternatively remanded the matter to the adjudicating authority with direction to decide the demand proceedings only after disposal of Appeal No. E/3442/2010-EX(DB) filed by the applicant in remission case. However, the Commissioner (Appeals) has departed from the established practice set by his predecessors without advancing any reason to do so. Consequently, the impugned order is not sustainable under law. 4.2.9 That both the lower authorities failed to appreciate that the production, clearance and storage of molasses is under the physical control of State Excise Authorities. The assessee cannot remove even a single drop of molasses without permission of the State Excise Authorities. Further, the State Excise Inspector has clearly certified on 31-8-2008 that tank No. 5 suddenly burst out at about 21.00 hours on 27-4-2008 and molasses spread in the open field and gone out in the drain. He has further certified that out of spread molasses, the applicant could ....
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....nbsp; CCE, Ahmedabad v. Roopalee Dyg & Ptg. Works - 2008 (230) E.L.T. 536 (Tri.-Ahmd.). 6. Government has carefully gone through the relevant case records available in case files, oral and written submissions and perused the impugned Orders-in-Original and Order-in-Appeal. 7. On perusal of records Government observes that the applicant has filed application for remission of duty before the Commissioner, Central Excise, Meerut-I vide their letter dated 10-7-2008 on account of storage loss of 39282 quintals of molasses due to bursting of tank. The Commissioner vide Order No. 13/Commr/Meerut-I/2010-11, dated 15-7-2010 rejected the remission claim holding it as inadmissible in terms of provisions of Rule 21 of Central Excise Rules, 2002 as the bursting of the tank was neither due to natural reasons nor unavoidable accident and further directed the duty of Rs. 30,34,565.40 be paid up immediately. A show cause notice dated 22-4-2009 was also issued to the applicant for recovery of duty on the molasses apparently lost in the bursting of the tank along with interest and for imposition of penalty. The Additional Commissioner confirmed demand of duty....
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....d. Removal can be by actual movement of goods, by destruction, for further use within factory etc. Had physical removal to a place outside the factory been a pre-condition for payment of duty then there would be no requirement for provision of remission of duty under Rule 21 ibid in specified circumstances only. Government finds that no exclusion or remission of duty on loss of goods has been provided except in circumstances provided in Rule 21 ibid and duty payment on loss of goods under all other circumstances is inevitable. 11. Government observes that duty liability arises on the event of manufacture of goods and the payment of duty is when the goods are removed from the place of manufacture. In the present case, the loss of goods due to bursting of storage tank is tantamount to removal as they cease to exist in the factory. Further, it is also an admitted fact that the goods went into the open fields and drains. The applicant has relied on the judgment in the case of J.K. Spinning and Weaving Mills Ltd. v. UOI - 1987 (32) E.L.T. 234 (S.C.) which is not similar to the present case. Upon perusal of the said order, Government notes that the Hon'ble Supreme Court has interpr....
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....oner (Appeals) in setting aside the penalty equivalent to the demand of duty under Rule 25 of the Central Excise Rules, 2002, which reads as under : "Rule 25. Confiscation and penalty. - (1) Subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer : - (a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or (b) does not account for any excisable goods produced or manufactured or stored by him; or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under Section 6 of the Act, or (d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty. Then all such goods shall be liable to confiscation and the producer or manufacturer or registered person of warehouse or a registered dealer as the case may be, shall be liable to a penalty not exceeding the duty on ....