2022 (8) TMI 988 - HC - Central Excise

Remission of duty - leakage of the tank where molasses were stored - remission rejected on the ground that the application was not filed within the prescribed period of 24 hours as prescribed in Trade Notice No.29/2003 - manufacture of molasses - losses within the prescribed limit or not - HELD THAT - Section 37B of the Act confers the power upon the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act to issue directions for uniformity in the classification of excisable goods or with respect of levy of excess duties. It is on record that the petitioner was served with a showcause notice under Section 11A of the Act claiming the payment of duty and interest under Section 11AB of the Act to which a Defense Reply was submitted. It was incumbent upon the Central Excise Authorities to have considered the documents submitted by the petitioner alongwith his defense reply including the fact that the sugar mill of the petitioner was under the control of the State Authorities and of the Central Excise Authorities. There is no denial of the fact that the remission claimed by the petitioner was within the prescribed limit of 2% for remission of duty. It is well settled that without there being a foundation to invoke a larger period of limitation as provided in the proviso to Section 11A of the Act, no orders can be passed thereupon. Even otherwise in the present case, the fact with regard to the accident was well within the knowledge of State Authorities and there was no reason for the Central Excise Authorities to have denied the benefit of remission of duty as claimed by the petitioner under Rule 21. That being the case coupled with the fact that there was no specific allegation in the show-cause notice that the assessee had not paid the duty, the orders impugned being order dated 14.10.2011 (Annexure 1), the appellate order as well as the order-in-original are clearly not sustainable and are set aside. It is well settled that central excise duty is payable on manufacture; although the word goods has not been defined under the Act, it is well settled by the Hon ble Supreme Court that for the article to be considered as goods , the same must be something which can ordinarily come to the market to be bought and sold. Once the goods are not marketable, they are not liable to duty. In the present case there is no material to allege or establish that the brown sugar was marketable and once there is no foundation to hold that brown sugar, on which the remission was claimed, was marketable goods, no question of payment of duty arises. Even otherwise, no allegation was levelled in the show-cause notice with regard to clandestine removal, which was required to be established while raising a demand under Section 11A of the Act. The show-cause notice was served to the petitioner therein calling upon the petitioner to show-cause as to why the application for remission may not be rejected mainly on the ground that no intimation was given to the Range Officer within 24 hours as prescribed in the Trade Notice - the said issue is covered by the judgment of the Tribunal in the case of Ramala Sahkari Chini Mills Ltd. 2007 (2) TMI 59 - CESTAT, NEW DELHI , which issue has attained finality. Even otherwise, the claim of the petitioner was well within the prescribed limit of being less than 2%. Thus, there being no material to allege against the petitioner that there was any evasion of duty, the impugned orders being order dated 28.11.2013 (Annexure - 6), the appellate order dated 07.07.2011 (Annexure - 5) as well as the order-in-original dated 30.12.2009 (Annexure - 4) are not sustainable and are set aside. Petition allowed.

Summary

Issues Involved:
1. Remission of duty under Rule 21 of the Central Excise Rules.
2. Marketability of brown sugar and its liability to central excise duty.
3. Limitation period for issuing show-cause notices under Section 11A of the Central Excise Act.
4. Compliance with procedural requirements such as intimation within 24 hours as per Trade Notice No. 29/2003.

Issue-wise Detailed Analysis:

1. Remission of Duty under Rule 21 of the Central Excise Rules:
The petitioner challenged the rejection of remission of duty under Rule 21 on the ground that the application was not filed within the prescribed period of 24 hours as per Trade Notice No. 29/2003. The court observed that the Tribunal in the case of Ramala Sahkari Chini Mills Ltd. v. Commissioner Central Excise, Meerut had held that procedural requirements in a trade notice cannot override statutory rules. Rule 21 does not prescribe any time limit for intimation of losses. The court concluded that the department could not rely solely on the trade notice to deny remission. The orders impugned were set aside as the remission claimed was within the prescribed limit of 2% and the show-cause notice was issued beyond the prescribed period of limitation without any foundation for invoking the extended period of limitation.

2. Marketability of Brown Sugar and Its Liability to Central Excise Duty:
The petitioner contended that brown sugar, which is not marketable due to high molasses content and other impurities, should not be liable to central excise duty. The court reiterated that central excise duty is payable on manufacture and goods must be marketable to be liable to duty. Since there was no material to establish that brown sugar was marketable, no duty could be levied. Additionally, the show-cause notice lacked any allegations of clandestine removal or suppression of facts, making the demand unsustainable. The impugned orders were set aside.

3. Limitation Period for Issuing Show-Cause Notices under Section 11A of the Central Excise Act:
The court noted that the show-cause notice for the month of May 2007 was issued beyond the six-month limitation period without any specific averment to invoke the extended period of limitation under the proviso to Section 11A. The court emphasized that without a foundation to invoke a larger period of limitation, no orders could be passed under the extended period. The impugned orders were set aside due to the lack of any specific allegations of fraud, collusion, or suppression of facts.

4. Compliance with Procedural Requirements Such as Intimation within 24 Hours as per Trade Notice No. 29/2003:
The court held that the requirement of intimation within 24 hours as per Trade Notice No. 29/2003 could not override the statutory provisions of Rule 21, which does not prescribe any time limit for intimation of losses. The court followed the precedent set by the Tribunal in Ramala Sahkari Chini Mills Ltd. and concluded that the procedural requirement in the trade notice could not be used to deny remission. The impugned orders were set aside as the claim for remission was within the prescribed limit and there was no material to allege evasion of duty.

Conclusion:
All three writ petitions were allowed. The impugned orders in each case were set aside based on the findings that procedural requirements in trade notices cannot override statutory rules, the goods in question were not marketable, and the show-cause notices were issued beyond the prescribed limitation period without proper foundation for invoking the extended period of limitation.