1986 (9) TMI 257 - AT - Central Excise

Summary

Issues:
- Duty liability on molasses cleared without payment
- Compliance with Rule 49(1) of Central Excise Rules, 1944
- Applicability of second proviso to Rule 49(1)
- Penalty imposition under Rule 173Q of Central Excise Rules, 1944

Analysis:

Issue 1: Duty liability on molasses cleared without payment
The case involved the appellant, a sugar mill, clearing a quantity of molasses without paying duty, leading to a demand from Central Excise Authorities. The appellant argued that the molasses had become unfit for marketing and was destroyed with permission from State Excise Authorities. The Central Excise Authorities contended that the goods were cleared without their permission, thus violating Central Excise Rules, 1944.

Issue 2: Compliance with Rule 49(1) of Central Excise Rules, 1944
The adjudicating authority found that the appellant did not comply with Rule 49(1) which allows for the destruction of excisable goods found unfit for human consumption and marketing without duty payment, subject to the Collector's permission. The authority held that permission from State Excise Authorities did not fulfill the requirements of Rule 49(1), leading to duty liability.

Issue 3: Applicability of second proviso to Rule 49(1)
The appellant argued that the second proviso to Rule 49(1) exempts duty payment if goods are unfit for consumption or marketing and destroyed irretrievably. The Tribunal agreed with the appellant, stating that demanding duty without proper Central Excise Authorities' permission in such cases would be unreasonable. The Tribunal set aside the duty demand based on the substantive condition of goods being destroyed and irretrievable.

Issue 4: Penalty imposition under Rule 173Q of Central Excise Rules, 1944
Regarding the penalty imposed under Rule 173Q, the Tribunal noted that the breach of procedure was technical, with no deliberate intention to violate rules. The penalty was reduced from Rs. 1000 to Rs. 100, considering that the Central Excise Authorities were informed of the correspondence with State Excise Authorities.

In conclusion, the Tribunal disposed of the appeal in favor of the appellant, setting aside the duty demand based on the second proviso to Rule 49(1) and reducing the penalty due to the technical nature of the breach.