1985 (1) TMI 325 - AT - Central Excise

Summary

Issues:
Violation of sub-rules (c) and (d) of rule 151 of the Central Excise Rules, 1944; Penalty imposition; Demand for duty on shortage of tobacco; Confiscation and redemption fine; Application of rule 9A(5) in cases of illicit removal.

Analysis:
The appellant, a tobacco warehouse licensee, was penalized for contravening sub-rules (c) and (d) of rule 151 by illicitly removing non-duty-paid tobacco from the bonded warehouse. A penalty of Rs. 2,000 was imposed, and duty on the shortage of 74,716 kgs. was demanded under rule 160. Additionally, 16,310 kgs. of seized tobacco was confiscated with an option for redemption upon payment of a fine of Rs. 5,000.

During the appeal hearing, the appellant accepted the penalty and redemption fine but contested the duty demand on the shortage. The appellant argued that duty exemption on unmanufactured tobacco from 1-3-79 rendered the duty demand invalid. Citing Govt. instructions, the appellant claimed no duty liability due to the exemption. The Department cited rule amendments and legal interpretations regarding duty applicability pre and post 11-4-81.

The Department proposed remanding the case to the Collector for further consideration, suggesting a portion of the shortage could be attributed to losses under rule 9A(4)(iii). The appellant refuted this, maintaining the shortage resulted from illicit removal, not natural losses. The appellant highlighted discrepancies and the absence of natural dryage to support his stance.

The Tribunal dismissed the appeal concerning penalty, confiscation, and redemption fine acceptance by the appellant. However, regarding the duty demand on the tobacco shortage, the Tribunal agreed with the appellant's argument. Relying on the Collector and Board's findings, the Tribunal applied rule 9A(5) to the case of illicit removal, as advised by the Ministry of Law. The Tribunal upheld the exemption of duty on the shortage of 74,716 kgs. of unmanufactured tobacco, based on the legal interpretation and precedent set by the highest authorities in the Department.

In conclusion, the Tribunal allowed the appeal to the extent of setting aside the duty demand on the tobacco shortage but upheld the impugned order in other aspects, confirming the penalty, confiscation, and redemption fine.