2023 (6) TMI 783 - HC - Central Excise

Remission of duty - loss of molasses due to natural causes - rejection on the ground that on physical verification as done from time to time, no substantial loss was found till 23-6-2008 and all of a sudden in 81 days, the loss as claimed by the petitioner, was deducted, which was unlikely - HELD THAT - Section 11A of Central Excise Act, on a plain reading confers the power upon the Central Excise Department to recover the dues not levied or not paid or short-levied or short-paid or erroneously refunded. It is well settled that the Central Excise Duty is a duty leviable on manufacture as defined under the Act i.e. the incidence of tax is manufacture - Rule 8 prescribes that the time when the duty is payable on manufacture at the time of removal; that is to say, the duty is payable on the goods when they are removed from the factory or the warehouse. In the present case, the petitioners claimed remission on loss of molasses due to natural causes, which was doubted by the department and a show-cause notice was issued calling upon the petitioners to show cause as to why the remission application may not be rejected and the duty may not be demanded - In the entire show cause notice, which is on record, there is no allegation that the petitioners had clandestinely removed the molasses in contravention of Rule 8 and had not paid the duty thereupon. In the absence of any allegation to the effect in the show cause notice and a consequent finding that the goods were removed without payment of duty, the duty cannot be levied under Section 11A of the Act even if the remission application is liable to be dismissed. In the present case, even with regard to the grounds for rejecting the remission application, the Authorities were of the view that the loss as claimed in a very small period makes the whole issue suspicious, this view was formed treating the measurement as done by the State Excise Authorities to be the correct method for valuation completely ignoring the fact that the remission as claimed by the petitioners was over a larger period of the assessment year, thus, the same is also contrary to the law as laid down by this Court in the case of BALRAMPUR CHINI MILLS LTD. VERSUS THE COMMISSIONER CENTRAL EXCISE ALLAHABAD 2017 (2) TMI 203 - ALLAHABAD HIGH COURT - in view of the law laid down in the case of Balrampur Chini Mills Ltd., the impugned orders rejecting the remission application are contrary to the said judgment, as such, the impugned orders are liable to be set aside on that ground also. The impugned orders in each of the writ petitions are set aside - the writ petitions are allowed.

Summary

Issues Involved:
1. Remission of duty on molasses lost due to storage.
2. Allegation of clandestine removal of molasses.
3. Validity of show cause notices and orders rejecting remission applications.

Detailed Analysis:

1. Remission of Duty on Molasses Lost Due to Storage:
The petitioners, manufacturers of sugar, claimed remission of duty on molasses lost during storage under Rule 21 of the Central Excise Rules. They argued that the loss was within the prescribed limit as per C.B.E. & C. Circulars dated 18-7-1983, 22-10-1982, and 6-8-1982, which condone losses up to 2%. The department rejected the remission applications, suspecting the loss due to the short span of time in which it occurred. The court noted that the remission claim was for a larger period of the assessment year and not an abrupt removal, thus aligning with the precedent set in Balrampur Chini Mills Ltd. v. Commissioner of C.Ex., Allahabad, 2017 (349) E.L.T. 206 (All.). The court found the rejection of remission applications to be contrary to this precedent.

2. Allegation of Clandestine Removal of Molasses:
The department's show cause notices did not allege that the petitioners had clandestinely removed molasses without paying duty. The court emphasized that for duty to be demanded under Section 11A of the Central Excise Act, there must be an allegation and proof of clandestine removal. The court rejected the argument that the mere absence of goods presumes clandestine removal, stating that the burden of proof lies with the department. There was no evidence or allegation of clandestine removal in the show cause notices or the impugned orders.

3. Validity of Show Cause Notices and Orders Rejecting Remission Applications:
The court scrutinized the statutory provisions, particularly Section 11A of the Act and Rules 4, 8, and 21 of the Central Excise Rules. It concluded that the duty is payable at the time of removal and not merely on manufacture. The remission applications were rejected based on the assumption that the measurements by State Excise Authorities were accurate, ignoring the possibility of froth formation affecting the dip method used for measurement. The court found this approach flawed and unsupported by the law. Consequently, the orders rejecting the remission applications were deemed invalid.

Conclusion:
The court set aside the impugned orders and allowed the writ petitions, emphasizing the lack of allegations or proof of clandestine removal and the incorrect application of remission rules by the authorities. The decision underscores the importance of adhering to established legal standards and precedents in excise duty matters. No costs were awarded.