2015 (3) TMI 1256 - AT - Central Excise

Molasses cleared to katcha pit at the time of entry in the DSR - demand of duty with interest and penalty - Held that - the appellants in their DSR had shown removal of molasses to katcha pit. This means that the appellants themselves had treated removal of molasses to katcha pit as removal in accordance with the provisions of law. That being the position, it would not be appropriate to take a view in favor of the appellant that there was no removal. Having treated the storage in katcha pit and removal to the katcha pit as a removal, as per the provisions of Rule 8 of Central Excise Rules, 2002, the appellant should have discharged the duty liability without any further proceedings being initiated by the Revenue - demand for duty and interest is sustained. Penalty - Held that - the appellant has lost the interest portion which they could have saved if they were to maintain the stock in the katcha pit in the DSR. For a mistake, penalty of ₹ 50,000/- is very high. Accordingly, some reduction in penalty is warranted - Penalty u/r 25 of Central Excise Rules, 2002 imposed on the appellant is reduced to ₹ 25,000/-. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Duty liability on molasses cleared to katcha pit.
2. Applicability of penalty under Rule 25 of Central Excise Rules, 2002.

Analysis:
1. The appellant, engaged in sugar and molasses manufacturing, cleared molasses to katcha pit without paying duty initially. A statement admitted the mistake, and duty with interest was paid later. The show cause notice demanded duty, interest, and penalty. The Tribunal considered the appellant's argument based on a previous case but found that the appellant treated the storage in katcha pit as removal in their records, making duty payable. The appellant's stance was not accepted, and duty demand was upheld. However, considering the mistake, the penalty under Rule 25 was reduced from Rs. 50,000 to Rs. 25,000.

2. The appellant argued that since they paid duty at the time of actual removal from the factory, no penalty should apply for storing molasses in katcha pit. The Tribunal noted that the appellant's own records treated the storage as removal, making duty payable as per Rule 8 of Central Excise Rules, 2002. While duty demand was upheld, the penalty was reduced to Rs. 25,000 due to the admitted mistake and the appellant's compliance post the error. The Tribunal acknowledged the appellant's error but upheld the duty demand and reduced the penalty amount in light of the circumstances.