2016 (9) TMI 40 - AT - Central Excise

Remission of duty payable on 4082 MTs of molasses - deteriorated due to auto-combustion and ultimately became unfit for consumption - Held that - the issue is no longer res integra and stands covered by the judgement of the Hon ble Allahabad High Court rendered in the case of CCE Allahabad Vs Balrampur Chini Mills Ltd. 2005 (7) TMI 30 - HIGH COURT ALLAHABAD . The appellant had taken all pre-cautionary steps that can be taken and it was only due to excessive production and generation of molasses that State Government had not given permission to clear the said molasses; that the quantity under dispute became unusable which was destroyed and there was no dispute to the fact that the goods were unfit for human consumption. It is also found that, the molasses was susceptible for deterioration due to auto-combustion and due to long storage of molasses in the masonry tank, it quickly deteriorated and became unfit for consumption. Therefre, the impugned order is liable to be set aside and consequently the rejection of remission of duty by the adjudicating authority besides imposition of penalty of ₹ 1 lakh and the demand of interest are set aside as unsustainable in law. - Decided in favour of appellant

Summary

Issues:
Remission of duty on deteriorated molasses due to auto-combustion and negligence.

Analysis:
The case involved the appellant, a sugar mill, storing excess molasses in masonry tanks leading to deterioration due to auto-combustion, rendering it unfit for consumption. The State Government's permission was required to clear molasses, which was not granted in this case. The appellant sought remission of duty under Rule 49 (1) of the Central Excise Rules, 1944 for the 4082 MTs of molasses that became unfit for human consumption. The State Pollution Control Board's control over molasses storage was highlighted, indicating the appellant's adherence to regulations. The adjudicating authority issued a show cause notice alleging negligence, leading to confirmation of duty demand, penalty imposition, and interest levying. The appellant contended that the molasses damage was beyond their control, emphasizing natural causes over negligence. The Revenue argued in favor of the authority's decision, asserting its legality and correctness.

The Tribunal referred to a judgment by the Allahabad High Court, emphasizing that duty is not payable for goods lost due to natural causes, distinguishing it from cases of negligence. The High Court's ruling supported the appellant's position that duty remission was justified in cases of natural destruction. The Tribunal found that the appellant had taken necessary precautions, and the molasses' deterioration was a result of excessive production and storage conditions. It was noted that the molasses quickly deteriorated due to auto-combustion during extended storage. The Tribunal concluded that the impugned order was unsustainable in law, setting it aside along with the penalty and interest demands. The appeal was allowed, and the remission of duty was granted, highlighting the uncontrollable nature of the molasses' deterioration.