2015 (10) TMI 2613 - CGOVT - Central Excise

Remission of duty - Rule 21 of CER, 2002 - imposition of penalty u/r 25 of CER, 2002 - storage loss - destruction of molasses - rejection on the ground that the bursting of the tank was neither due to natural reasons nor unavoidable accident - applicability of Board Circular F. No. 261/15CC/1/80-CX 8, dated 6-2-1982 - Held that - Government notes that penalty shall be imposed on a manufacturer if he removes goods in contravention of the provisions of the Central Excise Rules and Notifications issued thereunder - In the present case it is an uncontested fact that provisions of Rules 4, 6 & 8 ibid have been violated by the applicant. The duty is payable on the loss of goods but the same has not been paid. The applicant was liable to take all reasonable steps to safeguard Government revenue involved in the impugned goods and were liable to pay duty on the same which they failed to do. Therefore, provisions of Rules 4, 6 & 8 have been contravened and penalty has been rightly imposed by the original adjudicating authority. Demand of duty, interest and penalty upheld - revision disposed off - decided against assessee.

Issues Involved:
1. Remission of duty on molasses lost due to bursting of storage tank.
2. Demand of duty and interest on lost molasses.
3. Imposition of penalty under Rule 25 of Central Excise Rules, 2002.

Detailed Analysis:

1. Remission of Duty on Molasses Lost:
The applicant, engaged in the manufacture of sugar and molasses, reported a loss of 39,282.40 quintals of molasses due to the bursting of a storage tank. They applied for remission of duty under Rule 21 of Central Excise Rules, 2002. The Commissioner of Central Excise, Meerut-I, rejected the remission application, stating the loss was not due to natural reasons or unavoidable accidents. This decision was challenged by the applicant before the CESTAT, but no stay or final order was produced.

2. Demand of Duty and Interest:
The Additional Commissioner issued a show cause notice demanding Rs. 30,34,566/- under Section 11A of the Central Excise Act, 1944, along with interest under Section 11AB. The Commissioner (Appeals) upheld the duty demand and interest but set aside the penalty. The applicant contended that duty is linked to the physical removal of goods, which did not occur in this case. However, the Government observed that duty liability arises upon manufacture, and payment is due at the time of removal, which includes destruction or loss within the factory. Hence, the duty on the lost molasses was rightly confirmed.

3. Imposition of Penalty under Rule 25:
The Department argued that the penalty under Rule 25 should be imposed as the applicant failed to safeguard government revenue. The Commissioner (Appeals) had set aside the penalty, stating there was no intent to evade duty. However, the Government noted that intent to evade is not a prerequisite for contraventions under parts (a), (b), and (c) of Rule 25. Since the applicant violated provisions of Rules 4, 6, and 8 by not accounting for the duty on lost molasses, the penalty was rightly imposed by the original adjudicating authority.

Conclusion:
The Government upheld the Order-in-Appeal confirming the demand of duty and interest but modified it to reinstate the penalty under Rule 25. The revision applications were disposed of accordingly.

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