1990 (4) TMI 132 - AT - Central Excise

Summary

Issues:
1. Appeal against the order of the Collector of Central Excise regarding the demand for excise duty on deteriorated molasses stored in katcha pits.

Detailed Analysis:
The case involved two appeals (E/155/89 and E/156/89) against the orders of the Collector of Central Excise, Aurangabad, regarding the demand for excise duty on deteriorated molasses stored in katcha pits due to natural causes. The appellants, sugar manufacturers, requested permission to store excess molasses in katcha pits due to a bumper crop in 1981-82. The Collector demanded excise duty on the deteriorated molasses, leading to show cause notices under Sec. 11A read with Rule 49 of the Central Excise Rules 1944. The Collector confirmed the duty demands, prompting the appeals against the orders.

The appellants argued that the duty demand was unjustified as the molasses deteriorated due to natural causes, primarily heat, making them unmarketable. They contended that the Special B-2 bond they executed should not prevent them from seeking remission of duty under statutory provisions. They cited a previous decision by the Tribunal that upheld the appellants' right to remission despite executing the bond. The Department, however, argued that the appellants knowingly accepted the conditions of the bond, including forgoing remission in case of loss.

The Tribunal, after considering the arguments, referred to a previous decision involving a similar issue and held that demands based on the Special B-2 bond were unenforceable. The Tribunal emphasized that the statutory remedy and judicial decision-making process under Rule 49 could not be disregarded. It concluded that both appeals should be allowed based on the precedent set in the previous case.

Furthermore, the Tribunal questioned the transfer of the case to the Collector without allegations of fraud, collusion, or willful misstatement, as required by the amended proviso to Sec. 11A. The Tribunal highlighted Rule 49 of the Central Excise Rules, noting that duty need not be paid on goods unfit for consumption or marketing. It emphasized that even if the loss was due to human error or negligence, the goods being unfit for consumption exempted them from duty liability. The Tribunal also noted that the Collector had granted permission for destruction, which should extinguish duty liability as per the rules. Consequently, the Tribunal allowed the appeals and set aside the orders of the Collector of Central Excise, Aurangabad.

In conclusion, the Tribunal's decision was based on the interpretation of statutory provisions, previous judicial decisions, and the specific circumstances of the case, ultimately ruling in favor of the appellants regarding the excise duty on deteriorated molasses stored in katcha pits.