2004 (2) TMI 395 - AT - Central Excise

Summary

Issues:
Demand of duty on shortage of molasses without proper adjudication on remission application; Validity of penalties imposed under Section 11AC and Rule 173Q; Rejection of remission application without due process; Premature show cause notice demanding duty.

Analysis:
The case involves a demand of Rs. 89,310/- against the appellants for a shortage of molasses from December 1999 to January 2001, with penalties imposed under Section 11AC and Rule 173Q. The Counsel for the appellants argued that the shortage was due to natural causes, and they had applied for remission of duty, awaiting a decision from the Commissioner. However, the Superintendent communicated the rejection of the remission application without a proper adjudication. The appellants requested an appealable order after a show cause notice and proper adjudication but received a premature notice demanding duty and imposing penalties. The original authority confirmed the demand and penalties, leading to the unsuccessful appeal and the current appeal before the Tribunal.

Upon review, the Tribunal found that the Commissioner had not served any order on the remission application to the assessee, and the demand for duty was made without proper adjudication on the remission application. The lower authorities disregarded the appellants' plea that no demand could be raised without adjudication. The Tribunal emphasized that any application for remission should be handled by the Commissioner as a quasi-judicial authority, requiring a speaking order and an opportunity for the applicant to explain. In this case, the Superintendent's letter indicated a rejection without a proper order, rendering the demand premature and invalid. Consequently, the Tribunal set aside the orders of both authorities and allowed the present appeal.

The Tribunal directed that the department could proceed with the show cause notice only after the Commissioner's final decision on the remission application. This judgment highlights the importance of due process in adjudicating remission applications and the invalidity of premature demands for duty without proper adjudication.