1998 (12) TMI 191 - AT - Central Excise

Summary

Issues:
1. Demand of duty for draining molasses into an unapproved pit without prior permission.
2. Application for remission of duty due to deterioration of molasses.
3. Interpretation of Central Excise Rules regarding duty liability for shifting molasses.
4. Applicability of Central Excise Collectorate's Instruction No. 1/88.
5. Allegation of suppression of facts and invocation of Section 11A.

Analysis:

Issue 1 - Demand of Duty for Draining Molasses:
The appellants drained out molasses into an unapproved pit without permission, leading to a demand-cum-show cause notice for basic and special duty. The Assistant Collector confirmed the demand, citing a breach of Central Excise law due to the removal of molasses in violation of regulations. The lower appellate authority upheld the duty liability, emphasizing that the unapproved pit was not an authorized storage place. The Tribunal noted the removal to the unapproved pit but highlighted that duty liability arises only upon removal from the factory, as per Rule 9 and Rule 49 of the Central Excise Rules. The demand for duty at the time of removal to the unapproved pit inside the factory was deemed unjustified.

Issue 2 - Application for Remission of Duty:
The appellants had applied for remission of duty, stating that the molasses had deteriorated before being drained into the unapproved pit. They argued that the duty should be remitted as the molasses had become unfit for sale. The Tribunal acknowledged the deterioration of the molasses before removal and emphasized that duty liability does not apply to goods unfit for consumption. The pending application for remission further indicated that the demand for duty was premature and incorrect in law.

Issue 3 - Interpretation of Central Excise Rules:
The Tribunal analyzed the provisions of Rule 9 and Rule 49, concluding that duty liability is contingent upon the removal of goods from the factory. The presence of the unapproved pit within the factory did not warrant duty payment until actual removal. The Tribunal highlighted the discrepancy between the Collectorate Instruction and the Central Excise Rules, asserting that the demand for duty was not aligned with the legal requirements.

Issue 4 - Applicability of Central Excise Collectorate's Instruction:
The Collectorate Instruction No. 1/88, prohibiting the storage of molasses in unapproved pits, was deemed inapplicable in this case. The Tribunal emphasized that the instruction contradicted the Central Excise Rules regarding duty liability and removal of goods. The instruction's relevance was questioned, further supporting the decision to set aside the demand for duty.

Issue 5 - Allegation of Suppression of Facts and Section 11A:
The authorities alleged a deliberate breach of Central Excise law and suppression of facts by the appellants. However, the Tribunal found no merit in these allegations, especially considering the circumstances of molasses deterioration and the pending application for remission. The invocation of Section 11A was deemed unwarranted, leading to the appeal's allowance and relief granted to the appellants.

In conclusion, the Tribunal set aside the demand for duty, emphasizing the legal provisions, the molasses' condition, and the inapplicability of certain instructions, thereby providing relief to the appellants.