2006 (3) TMI 43 - AT - Central Excise

Central Excise Molasses was stored at approved place and got deteriorates Department did not demand duty for years despite knowledge Now no demand is sustainable by rejecting the remission application

Summary

Issues:
Remission of duty on deteriorated molasses stored in open masonry tanks.

Analysis:
The appeal was filed against the Order-in-Original rejecting the request for remission of duty on deteriorated molasses stored in open masonry tanks. The Commissioner relied on CBEC Circulars and observed that the molasses had become deteriorated, causing revenue loss. The appellant argued that duty was payable only upon removal from the factory and explained the circumstances leading to storing molasses in masonry tanks. The Forensic Science Laboratory certified the molasses as not meeting specifications. The Commissioner rejected the remission claim based on Board's Circulars, despite judicial precedents supporting remission in similar situations.

The appellant cited Tribunal decisions and argued for remission under Rule 49 of Central Excise Rules, 1944. The Revenue sought to support the Commissioner's order based on judgments and Circulars. The Tribunal considered Rule 49, which provides for remission of duty on goods lost due to natural causes. Previous Tribunal decisions upheld remission for deteriorated molasses stored in kutcha pits. The Mumbai Bench decision and Board Circular supported remission for such cases.

The Commissioner rejected remission citing non-compliance with Circulars, which prohibited duty remission for molasses stored outside approved places. However, the approved ground plan included both steel and masonry tanks since the factory's inception. The molasses were shifted between tanks with department permission. Without obtaining a bond for duty recovery in case of deterioration outside approved storage, the department failed to demand duty despite knowing about the molasses for years. The Forensic Science Laboratory confirmed deterioration, leading the Tribunal to allow the appeal and grant remission.

In conclusion, the Tribunal allowed the appeal, emphasizing the lack of duty demand despite molasses deterioration and the absence of a bond for duty recovery outside approved storage. The decision highlighted the failure to follow proper procedures in demanding duty, leading to the grant of remission for the deteriorated molasses stored in open masonry tanks.