1987 (4) TMI 199 - AT - Central Excise

Summary

Issues:
1. Determination of shortage of molasses and the cause of such shortage.
2. Entitlement to remission of duty on losses due to natural causes.
3. Extent of losses attributable to natural causes and calculation of duty liability.

Analysis:

1. The case involved the appellants' plea regarding the shortage of molasses stored in open tanks during the period from May 1979 to 1982. The molasses were mixed with rainwater, affecting their quality and making it difficult to detect seepage and shortage due to the tanks remaining full. The appellants requested permission to sell the molasses in the open market after they became unfit for distillation. The High Court allowed open market sales due to the poor quality of molasses, as confirmed by testing, and the molasses were eventually drained out under the court's orders.

2. The main issue was whether the shortage of 19,703.35 quintals detected on 11-1-1982 was due to unavoidable accidents during storage or natural causes. The appellants argued that the loss was a result of natural causes like fermentation and seepage, exacerbated by the long storage period in open tanks. The Tribunal agreed that the loss was due to natural causes and granted remission of duty based on Rule 49, considering factors like non-lifting of molasses by distilleries and the impact of rainwater on the stored molasses.

3. The Tribunal determined the extent of losses attributable to natural causes, acknowledging that molasses are prone to such losses. Considering the storage conditions, period, and possible loss due to fermentation gases, the Tribunal granted the appellants a benefit of 50% of the detected loss. The duty liability was adjusted accordingly, and the penalty imposed was set aside due to the circumstances of the case. The decision highlighted the recognition of molasses' susceptibility to natural losses and the need to consider such factors in determining duty liability.