2017 (8) TMI 310 - HC - Central Excise

Levy of duty - Molasses - whether the Assessee would be liable to pay duty on molasses, which is stored in earthen pits, i.e., Katcha pits, located within the factory premises? - Held that - Rule 9(1) would show that it, inter alia, prohibits removal of excisable goods whether for consumption, or, export, or, even for manufacture of any other commodity either in or outside the place where they are produced, cured or manufactured or any other premises appurtenant thereto, which may be specified by the Commissioner, in this behalf, without payment of excise duty. Whether the storage of molasses in earthen pits, i.e., katcha pits, amounted to removal within the meaning of rule 9 read with rule 49? - Held that - the molasses were not removed outside the precincts of the factory - the premises appurtenant to the place of production, curing or manufacture can only be premises, which are attached or annexed to such premises. The earthen pits, i.e., katcha pits, in this case, were not annexed to the place of production or manufacture, i.e., factory premises, as is evident from the record and, upon perusal of the impugned Show Cause Notice. The earthen pits, i.e., katcha pits were located within the factory premises. The Assesseee could not have been called upon to pay duty, merely, on account of the fact that the molasses had been stored in earthen pits, i.e., katcha pits, which are otherwise located within the factory premises - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Whether the Assessee would be liable to pay duty on molasses stored in earthen pits within the factory premises?

Analysis:
The appeal was filed by the Assessee against the order of the Customs, Excise and Service Tax Appellate Tribunal, which dismissed the appeal based on a judgment of the Division Bench of the Patna High Court. The main issue was whether duty was payable on molasses stored in earthen pits within the factory premises. The Assessee argued that duty should only be paid upon removal of molasses from the factory premises, citing Rule 9 and 49 of the Central Excise Rules, 1944.

The Assessee had stored molasses in earthen pits despite authorities permitting storage only in steel tanks. A Show Cause Notice was issued demanding duty payment, which was later dropped based on previous proceedings where it was found that the earthen pits were within the factory premises. The Commissioner (Appeals) allowed the Revenue's appeal, leading to the Assessee appealing to the Tribunal and subsequently to the High Court.

The High Court analyzed Rule 9 and 49, stating that excise duty is payable upon removal of goods for a specified purpose from the place of production. The Court found that the molasses stored in earthen pits within the factory premises did not constitute removal under the rules. The Court distinguished the judgment relied upon by the Revenue, emphasizing that the situation in the present case was different from the precedent cited.

The Court ruled in favor of the Assessee, stating that duty payment was not required solely based on storing molasses in earthen pits within the factory premises. The judgment clarified that the Assessee may still be liable for duty in other circumstances like damage or actual removal of molasses. The appeal was allowed, setting aside the Tribunal's judgment, with no order as to costs.