2012 (10) TMI 927 - AT - Central Excise

Unauthorized removal of of molasses stored in approved molasses to Katcha Pits No. 5 & 6 which were not approved for storage - Penalty u/s 11AC - Commissioner set aside penalty - Held that - allegation against the respondent is that during the period from April 1996 to July 1996 they unauthorisedly removed 45,174 qntl. of molasses stored in approved molasses to Katcha Pits No. 5 & 6 which were not approved for storage and, therefore, not only they were liable to pay duty on this quantity at the time of storage in Katcha Pits, they were also liable for penalty. Accordingly, the duty of Rs. 17,88,390/- had been demanded on the quantity of 35,767.8 qntl. of molasses which was lying in stock as on 6-11-1997 when the respondent informed the department about the storage of molasses in Katcha Pits. There is no dispute that the balance quantity had been cleared on payment of duty at the appropriate rate. In our view, when there is no dispute that the unapproved Katcha Pits No. 5 & 6 were within the factory premises, there was no removal of the molasses from the factory and, as such, no contravention of any law. It is not disputed that the molasses stored in Katcha Pits is cleared on payment of duty as and when the same was removed from the factory. In view of this, we do not find any infirmity in the impugned order - Decided against Revenue.

Summary

Issues:
Allegation of unauthorized removal of molasses from approved storage to unapproved pits within the factory premises, demand of duty, imposition of penalty, appeal against duty demand and penalty, cross-objection by respondent, dispute over duty payment and storage location.

Allegation of Unauthorized Removal and Duty Demand:
The case involved an allegation that the respondent, manufacturers of sugar and molasses, had removed 45,174 qntl. of molasses from approved storage to unapproved Katcha Pits within the factory premises, violating Central Excise Rules. A show cause notice was issued for a duty demand of Rs. 17,88,390/- for unapproved removal. The Commissioner (Appeals) confirmed the duty demand on the balance stock of molasses not paid for, but set aside the penalty, considering the duty paid on clearances between June 1996 to October 1997. The Revenue contended that duty was payable on the quantity remaining in the unapproved pits, emphasizing the unauthorized transfer and duty liability. However, the Tribunal found that as the unapproved pits were within the factory premises, there was no actual removal from the factory, and duty was paid on clearances, leading to the dismissal of the Revenue's appeal and the disposal of the cross-objection.

Dispute Over Duty Payment and Storage Location:
The Respondent argued that since the unapproved pits were within the factory, there was no actual removal of molasses from the factory, and duty was paid upon removal from the storage location. The Counsel emphasized that duty was discharged as required, indicating no flaw in the impugned order. The Tribunal concurred, stating that the molasses stored in the unapproved pits were cleared upon payment of duty when removed from the factory, and as there was no contravention due to the pits being within the factory premises, the impugned order was upheld. The appeal by the Revenue was dismissed, and the cross-objection by the respondent was disposed of accordingly.