2001 (9) TMI 206 - AT - Central Excise

Summary

Issues:
1. Demand of duty on molasses
2. Penalty imposition under Rule 11AC
3. Recovery of interest under Section 11AB

Analysis:

Issue 1: Demand of duty on molasses
The case involved a dispute over the demand of duty on molasses by the Central Excise Authorities. The appellants, engaged in V.P. Sugar manufacturing, argued that the loss of 546.507 M.Ts. of molasses was due to natural causes and should be condoned for remission of duty under Rule 49 of the Central Excise Rules, 1944. The authorities had observed a discrepancy in the stock taking, leading to a high loss percentage. The appellants contended that the figures in the R.G. 1 register, based on actual weighment, should be considered for calculating the loss percentage. The Tribunal held that the loss of 5465.07 qntls. should be seen in relation to the total quantity stored in the tanks, not just the figures on the budget day. The loss percentage was found to be within the condonable limit of 2%, leading to the rejection of the demand for duty on molasses.

Issue 2: Penalty imposition under Rule 11AC
In addition to the duty demand, a penalty of Rs. 2,80,000/- was imposed under Rule 11AC by the authorities. The appellants argued that the stock verification method used by the authorities was incorrect, and the loss percentage was only 1.7%, well within the condonable limit. The Tribunal agreed with the appellants, emphasizing that the dip reading method used for stock verification was not a scientific method for determining the exact quantity of molasses. As the loss percentage was found to be condonable, the penalty imposed under Rule 11AC was set aside.

Issue 3: Recovery of interest under Section 11AB
Furthermore, the authorities had held that interest on delayed payment was to be recovered from the assessee under Section 11AB of the Central Excise Act, 1944. The Tribunal, after considering the contentions of both parties and the evidence on record, found that the authorities were in error in rejecting the request for remission of duty, imposing penalties, and demanding interest. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants.

In conclusion, the Tribunal's decision favored the appellants, highlighting the importance of considering the total quantity stored in tanks for calculating loss percentages and emphasizing the need for a scientific method of stock verification in excise matters.