2006 (3) TMI 640 - AT - Central Excise

Summary

Issues:
Demand of duty on clearance of molasses without payment, imposition of personal penalty.

Analysis:
The appellant, engaged in sugar manufacturing, faced a demand of duty and penalty for allegedly clearing molasses without payment. The State Excise Department approved two steel tanks for molasses storage, with a third tank under construction during the relevant period. The State Excise Department controlled molasses storage and removal, ensuring supervision by officers during clearance. Central Excise Officers found no discrepancies in the factory's stock during a visit on 22-7-96. However, on 9-8-96, Preventive Officers seized excess molasses, which the appellant claimed was water mixed with molasses due to a valve leak in tank No. 1.

Subsequently, State Excise authorities assessed watery molasses in tank No. 3 as unfit for consumption and permitted draining it out. Despite multiple letters to State Excise authorities, no response was received. The appellant drained the molasses under State Excise Authorities' supervision, informing Central Excise Authorities. State Excise Authorities found an excess of 4105 qtls. of molasses on 28-1-97, which was duly recorded. No objections were raised by State Excise authorities, and no action was taken against the appellant.

After detailed analysis, it was concluded that the drained molasses were unfit for human consumption and not marketable, hence not subject to duty. The drainage was supervised by State Excise authorities, amounting to a deemed application for duty remission. The appellant argued that if duty was required, it should be remitted. The demand for duty on the drained molasses was deemed unjustified.

Regarding molasses wastage, the appellant recorded it in the RG. 1 register based on State Excise authorities' objection, which was never confirmed. Adjusting the excess 4105 qtls. of molasses, the remaining shortage was below the permissible 2% wastage limit. Therefore, no justification existed for confirming duty on the alleged quantity.

In conclusion, the appeal was allowed, setting aside the impugned order, providing consequential relief to the appellant. The judgment was pronounced in court on 17-3-2006.