2008 (3) TMI 122 - AT - Central Excise

Loss of molasses of 0.25%, stored in pucca pits/steel tanks - when the competent authority i.e. the CBEC has taken a general decision to treat loss up to 2% as permissible loss, the person may not be required to prove that the loss was due to natural causes - It is not in dispute that the storage loss is a natural process, with the passage of time, which can be termed as natural cause in view of rule 21, remission is allowed

Summary

Issues:
1. Rejection of claim for remission of central excise duty on molasses.
2. Imposition of penalty and interest under Central Excise Act.
3. Interpretation of Rule 21 of the Central Excise Rules regarding remission of excise duty.
4. Dispute over the permissible storage loss of molasses.
5. Compliance with Trade Notice requirements for reporting loss of goods.
6. Evidence required to prove loss by natural causes or unavoidable accident.
7. Applicability of circular permitting storage loss up to 2%.
8. Commissioner's error in rejecting the claim for remission.

Analysis:
1. The judgment involves two appeals related to the rejection of a claim for remission of central excise duty on molasses and the imposition of penalty and interest under the Central Excise Act. The appellant, a sugar manufacturer, claimed that the loss of molasses was within permissible limits as per relevant provisions and circulars. The dispute arose when the quantity of molasses was found short upon clearance of tanks, leading to the demand of duty and penalty.

2. The appellant argued that the loss of molasses, stored in steel tanks, was a natural process and fell within the permissible storage loss limit of 2% as per the circular. The appellant contended that the Commissioner erred in disallowing the claim for remission based on the requirement to prove loss by natural causes or unavoidable accident under Rule 21 of the Central Excise Rules.

3. The Revenue, on the other hand, argued that without evidence of loss due to natural causes or unavoidable accident, the appellant was not entitled to remission. Reference was made to a Trade Notice requiring reporting of loss within 24 hours, which the appellant failed to comply with. The method of measuring molasses and the practical challenges in reporting losses were also discussed.

4. The Tribunal analyzed the provisions of Rule 21 and the circular permitting storage loss up to 2%. It was established that in cases where loss does not exceed 2% and the goods are stored as prescribed, the claimant may not need to prove loss by natural causes explicitly. The Tribunal emphasized that the nature and degree of proof required depend on the circumstances of the loss.

5. Ultimately, the Tribunal held that the appellant had made a valid case for remission, and the Commissioner erred in rejecting the claim. Both orders related to the rejection of the claim and the subsequent penalty imposition were set aside, granting relief to the appellants. The judgment highlights the importance of understanding the specific requirements and conditions for claiming remission of excise duty under the Central Excise Rules.