1998 (2) TMI 205 - AT - Central Excise

Issues:
1. Central Excise duty confirmation on alleged loss of brown sugar.
2. Reliability of chemical examiner's report.
3. Dutiability and excisability of brown sugar.
4. Jurisdiction of the Tribunal.
5. Defects in the show cause notice.
6. Burden of proof on the Revenue.
7. Storage loss for brown sugar determination.

Analysis:

The appeal in this case challenges the confirmation of Central Excise duty amounting to Rs. 32,725 on the alleged loss of brown sugar during processing, resulting in a shortage of 385 quintals. The Commissioner upheld the duty imposition based on the negligence in storing the sugar, citing Rules 47, 148, and 173G of the Central Excise Rules, 1944. The appellants argued that the order was defective as the Assistant Commissioner's observations did not align with the show cause notice. However, the Commissioner justified the duty imposition due to the high loss percentage of 29% and negligence in storage, disregarding the absence of a secure storage place for the sugar.

Regarding the reliability of the chemical examiner's report, the appellants contested that the report was not the basis of the show cause notice, rendering the order defective. The Commissioner acknowledged this but still relied on the report to confirm the duty imposition. The appellants also argued that brown sugar, arising during the manufacture of vacuum pan sugar, is not excisable goods based on previous judgments. They emphasized the lack of a formula or determination of normal production to calculate the shortage accurately, challenging the basis of the duty imposition.

The jurisdiction of the Tribunal was questioned by the Departmental Representative, claiming that loss during processing or storage does not fall under the Tribunal's purview. However, the appellants argued that the dutiability of brown sugar itself was in dispute, extending beyond mere loss during processing. The Tribunal overruled the jurisdictional objections, asserting that the issue involved determining the dutiability and excisability of brown sugar, falling under the Tribunal's jurisdiction as per the Excises and Salt Act.

The burden of proof was a crucial aspect, with the appellants asserting that the loss was due to natural causes related to the hygroscopic nature of brown sugar. The Revenue failed to provide evidence to counter this defense, shifting the burden of proof to them. Additionally, the storage loss for brown sugar was deemed indeterminable based on precedents where brown sugar was not classified as goods, further challenging the duty imposition.

The defects in the show cause notice were pivotal in the judgment, as the report of the chemical examiner was not initially relied upon in the notice. Despite acknowledging this defect, the Commissioner proceeded to confirm the duty based on the report, leading to the order being deemed beyond the notice's scope. Consequently, the Tribunal set aside the impugned order, allowing the appeal and relieving the appellants of the duty imposition.

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