1986 (10) TMI 229 - AT - Central Excise

Summary

Issues Involved:
1. Destruction of Molasses due to excessive rain.
2. Destruction of Molasses due to internal combustion.
3. Transfer of Molasses from approved kaccha pits to unapproved kaccha pits after becoming unsuitable for distillation.

Summary:

Issue 1: Destruction due to Excessive Rain
- Facts and Findings: The Molasses stored in kaccha pits were washed away due to heavy rains, as acknowledged by the Central Excise authorities. The Collectors recognized that the loss was due to natural causes but insisted on recovering duty based on the B-2 bond executed by the appellants.
- Judgment: The Tribunal held that the loss was due to natural causes and that the orders of the Collectors directing recovery of duty were opposed to the provisions of the Central Excise Act and Rules. The appeals were allowed, and any duty paid was to be refunded.

Issue 2: Destruction due to Internal Combustion
- Facts and Findings: The Molasses stored in kaccha pits were destroyed due to spontaneous internal combustion. The Collectors acknowledged the internal combustion but directed recovery of duty based on the B-2 bond.
- Judgment: The Tribunal found that the loss was due to natural causes and that the orders of the Collectors were unjustified. The appeals were allowed, and any duty paid was to be refunded.

Issue 3: Transfer to Unapproved Kaccha Pits
- Facts and Findings: Molasses stored in kaccha pits became unsuitable for distillation due to long storage and mixing with rainwater. The Collectors directed recovery of duty based on the B-2 bond, despite the Molasses being unfit for distillation.
- Judgment: The Tribunal held that the Molasses had become unfit for consumption due to natural causes and that the orders of the Collectors were unjustified. The appeals were allowed, and any duty paid was to be refunded.

Additional Observations:
- Validity of B-2 Bond: The Tribunal refrained from making any pronouncement regarding the validity of the B-2 bond, suggesting that the proper forum for such a determination is a Court of Law.
- Department's Appeal (ED(BOM)187/85): The appeal by the Department was rejected, with the Tribunal upholding the decision of the Collector (Appeals) that the deterioration of Molasses was due to natural causes and that remission of duty was within the scheme of the Central Excise Act and Rules.

Conclusion:
The Tribunal allowed the appeals of the sugar factories, setting aside the orders of the Collectors and directing that any duty paid be refunded. The Department's appeal was rejected.