2002 (11) TMI 195 - AT - Central Excise

Summary

Issues:
1. Remission of duty on lost quantity of molasses due to natural causes.
2. Allegation of remission application being an afterthought to cover up shortage.
3. Compliance with Rule 49 of the Central Excise Rules, 1944.
4. Interpretation of permissible loss limit for molasses in the sugar industry.
5. Consideration of Board's circulars and past judicial decisions in similar cases.

Analysis:
1. The case involved the appellants, manufacturers of VP sugar, seeking remission of duty on a quantity of molasses lost due to natural causes beyond their control during the sugar season 1997-98. The jurisdictional Commissioner rejected the remission application, alleging it was an afterthought to escape an offence detected by Central Preventive Officers. The appellants contended that the loss was below the permissible limit of 2% and filed the remission application within a month of stock verification.

2. During the remission application process, the department issued a show cause notice demanding excise duty on the short molasses quantity. The Dy. Commissioner later dropped the demand, ruling out clandestine removal. The Commissioner's order was challenged on the grounds that the remission application was not an afterthought to cover up any shortage, especially since the loss was below 2%. The delay in filing the remission application was also addressed, with the appellants arguing it was within a reasonable timeframe.

3. The Commissioner's decision was further contested based on Rule 49 of the Central Excise Rules, 1944, which requires satisfaction of the proper officer regarding the loss or destruction of goods by natural causes. The appellants maintained that the loss of molasses was within the permissible limit and should have qualified for remission of duty.

4. The interpretation of the permissible loss limit for molasses in the sugar industry, set at a maximum of 2%, was a crucial aspect of the case. The appellants relied on Board's Circulars and past judicial decisions to support their argument that losses up to 2% should be condoned. The Commissioner's failure to consider this aspect was highlighted as a flaw in the decision-making process.

5. The judgment emphasized the importance of following Board's circulars and past judicial decisions in similar cases to ensure consistency in decision-making. The Commissioner's order was set aside, noting that the allegation of the remission application being an afterthought to cover up shortage was not substantiated, especially considering the permissible loss limit and the absence of evidence of clandestine removal. The appeal was allowed, granting consequential reliefs to the appellants.