1992 (11) TMI 203 - AT - Central Excise

Issues Involved:
1. Demand of duty on non-duty-paid molasses stored in Katcha Pit.
2. Applicability of Rule-49 of the Central Excise Rules, 1944.
3. Validity of B.2 Bond and its enforceability.
4. Procedural compliance for destruction of molasses.

Issue-Wise Detailed Analysis:

1. Demand of Duty on Non-Duty-Paid Molasses Stored in Katcha Pit:
The appellants were demanded to pay duty on 5759.44 quintals of non-duty-paid molasses stored in Katcha Pit No. 9 of their factory premises, as per the order passed by the Assistant Collector of Central Excise, Laheriasarai. The department claimed that the storage of non-duty-paid molasses was withdrawn as per Trade Notice No. 121/3-Ch. 17/88 dated 28-12-1988, and the appellants removed the molasses for destruction without informing Central Excise Officers, thereby justifying the duty demand.

2. Applicability of Rule-49 of the Central Excise Rules, 1944:
The appellants contended that since the molasses had become unfit for human consumption, no duty could be demanded under Rule-49 of the Central Excise Rules, 1944. They presented a Certificate dated 2-5-1990 from the State Excise authorities confirming the destruction of the molasses. The Tribunal referred to the decision in 1987 (29) E.L.T. 22, which held that sugar factories are entitled to remission of duty for molasses lost due to natural causes or becoming unfit for distillation. The Tribunal concluded that the duty demand was opposed to Rule-49 and the excisable goods are not liable to duty if they are unfit for consumption or marketing.

3. Validity of B.2 Bond and Its Enforceability:
The department argued that the appellants were liable to pay duty based on the B.2 Bond, which stated that duty must be paid even if the goods were lost or damaged. However, the Tribunal referred to the decision in 1987 (29) E.L.T. 22, which deemed such bonds unenforceable if they contradict the provisions of the Central Excise Act and Rules. The Tribunal held that the orders demanding duty based on the B.2 Bond were opposed to Rule-49 and thus, no duty could be charged.

4. Procedural Compliance for Destruction of Molasses:
The department contended that the appellants violated Rule-9 of the Central Excise Rules, 1944, by removing the molasses for destruction without permission from Central Excise authorities. However, the Tribunal noted that the molasses were destroyed under the supervision of the State Excise authorities and that the substantive condition for remission of duty under Rule-49 was that the goods were destroyed irretrievably. The Tribunal cited decisions, including 1987 (27) E.L.T. 701 and 1992 (58) E.L.T. 270, which supported the view that procedural lapses should not lead to duty demands if the goods were indeed unfit for consumption and destroyed accordingly.

Conclusion:
The Tribunal concluded that the demand of duty was not in accordance with law, as the molasses were unfit for consumption and destroyed under the supervision of State Excise authorities. The appeal was allowed, and the duty demand was set aside. The Tribunal emphasized that procedural violations should not override the substantive provisions of Rule-49, which grants remission of duty for goods unfit for consumption or marketing.

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