2012 (11) TMI 1006 - AT - Central Excise

Condonation of losses/shortages of molasses - Remission of duty - Commissioner rejected the claim in terms of Rule 21 of Central Excise Rules by observing that he had visited the appellant s factory and found that molasses were stored in well built leak proof tank and there was no chance of evaporation of molasses. He also observed that though Board s circular dated 6-2-1982 allows condition of 2% but the same applies only in those cases where the losses were on account of natural causes - Held that - Tribunal vide various precedent decisions has allowed loss of molasses stored in steel tanks up to 2%. The observation of Commissioner are based upon his personal knowledge without any material to show that the molasses stored in steel tanks cannot be evaporated. Molasses are known to be changing weight on account of various factors like foaming, evaporation, change on account of temperature, etc. In the absence of any evidence that such short found molasses were cleared by the appellant without payment of duty, their contention that such shortages resulted in on account of various natural factors has to be accepted inasmuch as loss is within the limitation of 2%. I find no reasons to deny the condonation of same and consequent remissions - Decided in favour of assessee.

Summary

Issues:
Condonation of losses/shortages of molasses for the period 2007-08 under U.P. Govt.'s Notification and relevant circulars, rejection of remission claim by Commissioner based on Rule 21 of Central Excise Rules, allowance of loss up to 2% for molasses stored in steel tanks based on precedent decisions of the Tribunal.

Analysis:
The appellant, engaged in sugar and molasses manufacture, sought condonation of losses of molasses due to natural causes like evaporation, handling, and chemical reaction in the storage tank. They relied on U.P. Govt.'s Notification and relevant circulars to support their claim. The Asstt. Commissioner recommended the remission claim be allowed as the loss was within the 2% limit of total production, emphasizing natural causes for the losses.

The Commissioner, however, rejected the claim citing Rule 21 of Central Excise Rules and personal observations that molasses stored in leak-proof tanks do not evaporate. He differentiated previous Tribunal decisions allowing up to 2% loss, stating they were based on minor grounds. The appellant contested this, highlighting that molasses weight can change due to various factors, including evaporation, foaming, and temperature fluctuations.

Upon review, the Tribunal found no merit in the Commissioner's order, emphasizing that precedent decisions allowed up to 2% loss for molasses stored in steel tanks. The Tribunal noted the lack of evidence showing the cleared molasses were short-found without duty payment. Accepting the losses as natural factors within the 2% limitation, the Tribunal set aside the Commissioner's order and allowed the appeal, granting consequential relief to the appellant based on established Tribunal decisions.

This detailed analysis of the judgment showcases the legal arguments, interpretations of relevant laws and notifications, as well as the application of precedent decisions by the Tribunal to resolve the issues raised in the case regarding the condonation of losses/shortages of molasses and the rejection of the remission claim by the Commissioner.