2016 (9) TMI 937 - AT - Central Excise

Demand and imposition of penalty - excess stock of molasses found in the storage tanks, unaccounted in the statutory records - clandestine removal of molasses - regular statement of MF-1 submitted by the parties to the State Excise Department - Held that - the variation found in the stock of molasses on 14/07/98 upon inspection by the Central Excise authority is a normal variation and no adverse inference is called for. Further, I take notice of the fact that the State Excise authority, who are in physical control of the stock of molasses of production, storage and dispatch in the appellant s factory have excepted the recorded stock and at the end of the molasses season have accepted the net excess at 961qtls. Therefore, I hold that the whole demand is based on assumption and presumptions and is fit to be set aside. The appellant informs that the duty and penalty in dispute have been appropriated by the Central Excise authority during the pendency of the appeals with the refund payable to the appellant. Accordingly, I direct the adjudicating authority to refund the amount adjusted, being in the nature of pre-deposit as the same have been adjusted out of refundable amount during pendency of the appeal, with interest as per Rules.

Summary

Issues:
1. Duty demand on alleged shortage of Molasses along with penalty.
2. Confiscation of excess quantity of Molasses found in two separate inspections.
3. Imposition of penalty under Central Excise Rules, 1944.
4. Appeal against rejection of appeals by Commissioner (Appeals).

Analysis:

Issue 1: Duty demand on alleged shortage of Molasses along with penalty
The appellant, a manufacturer of Sugar and Molasses, appealed against the rejection of their appeals confirming the duty demand on alleged shortage of Molasses along with penalty. The Central Excise officers conducted stock verification and found discrepancies in the recorded stock of Molasses, leading to duty demand and penalty imposition. The appellant contested the demand, citing factors like foam presence and temperature variations affecting stock estimation. However, the Commissioner (Appeals) upheld the duty demand and penalty, stating that excess stock was not accounted for properly, indicating clandestine removal without duty payment.

Issue 2: Confiscation of excess quantity of Molasses found in two separate inspections
Two separate inspections revealed excess quantities of Molasses in the appellant's storage tanks, leading to confiscation and penalty imposition. The Central Excise authority confiscated 5922.1qtl of excess Molasses in the first inspection and later found another excess quantity in a subsequent inspection. The State Excise authority accepted the excess stock at the end of the molasses season, which was subsequently cleared on payment of duty. The appellant contested the confiscation, arguing that the demand was based on assumptions and presumptions, as the State Excise authority had accepted the excess stock.

Issue 3: Imposition of penalty under Central Excise Rules, 1944
The appellant faced penalties under various rules of the Central Excise Rules, 1944, for the alleged clandestine removal of excess Molasses. The penalties were imposed for non-compliance with stock recording requirements and duty payment obligations. The appellant challenged the penalties, emphasizing compliance with State laws governing Molasses control and production. The Tribunal considered the variations in stock estimation and the acceptance of excess stock by the State Excise authority, leading to the setting aside of the penalties.

Issue 4: Appeal against rejection of appeals by Commissioner (Appeals)
The appellant appealed before the Tribunal against the rejection of their appeals by the Commissioner (Appeals). The Tribunal reviewed the contentions of both parties, focusing on the variations in stock estimation, compliance with State laws, and acceptance of excess stock by the State Excise authority. After considering the arguments, the Tribunal set aside the duty demand, penalties, and impugned orders, directing the refund of the adjusted amount to the appellant with interest. The appellant was entitled to consequential benefits as per the law.

This detailed analysis highlights the key legal issues, arguments presented, and the Tribunal's decision in the case involving duty demand, confiscation of excess Molasses, penalty imposition, and the appeal process.