1995 (11) TMI 148 - AT - Central Excise

Summary

Issues:
1. Improper drainage of molasses without following prescribed procedure.
2. Discrepancy between State Excise Department and Central Excise Department permissions.
3. Dispute over imposition of duty and penalty.

Analysis:
1. The appellants drained 52,230 quintals of molasses without following proper procedure for destruction of excisable goods, leading to a Central Excise duty of Rs. 15,669. The molasses had deteriorated and become unfit for use, requiring permission for drainage. Although State Excise Department granted permission and supervised the drainage, Central Excise Department did not oversee the process, raising concerns about duty imposition and penalty.

2. The appellant's advocate argued that since State Excise authorities permitted and supervised the drainage, no duty should be demanded, and no penalty should be imposed as compliance was with State authorities. In contrast, the Central Excise officer contended that the failure to follow Central Excise formalities justified the duty demand and penalty imposition, highlighting the discrepancy between State and Central permissions.

3. Referring to a previous Tribunal decision, the advocate cited that duty demand on destroyed goods may not be sustainable if the goods were unfit for consumption. The Tribunal's ruling emphasized that the breach of procedural conditions should not warrant duty imposition if goods were genuinely destroyed and unfit for consumption. In the current case, the Tribunal found similarities with the previous case, leading to the setting aside of duty demand but justifying penalty imposition due to unauthorized destruction.

4. The imposition of duty amounting to Rs. 15,669 and a penalty of Rs. 2,000 was contested by the appellant, arguing that the initial show cause notice did not mention penalty imposition. However, a corrigendum later specified the penalty imposition, leading to a discrepancy in the imposition process. Despite this, considering all factors, the appeal was accepted, and the duty demand was set aside, while the penalty was upheld due to the unauthorized destruction of goods.