2013 (8) TMI 96 - AT - Central Excise

Percentage of the quantity of molasses lost during that period came to 0.021% as total production The loss amounts to 3,40,875 qntls - The duty involved on this molasses was Rs. 5,628/- - Held that - Relying upon the judgment in the case of Mawana Sugar Works vs. CCE, Meerut -I reported in 2008 (3) TMI 122 - CESTAT NEW DELHI , wherein it was held that loss on account of natural causes upto 2% is condonable is applicable in the instant case considering the facts and circumstances of the case - Loss is only 0.021% of the total quantity of molasses produced during 2007-2008 sugar season. The loss being due to natural causes should have been condoned specifically in view of the fact that there is not even allegation that the quantity claimed by the appellant as loss has been illicitly removed - Therefore, the judgment of Allahabad High Court in the case of Kesar Enterprises Ltd. (Sugar Div.) vs. CCE, Meerut -II 2007 (7) TMI 160 - HIGH COURT ALLAHABAD is not applicable to the facts of this case Decided in favor of Assessee.

Summary

Issues:
1. Condonation of loss of molasses in ER-1 return for November 2008.
2. Interpretation of Board's Circular regarding storage loss.
3. Applicability of judgments in similar cases.
4. Justification for penalty and interest imposition.

Analysis:

1. The appellant, a sugar and molasses manufacturer, reported a loss of 72.85 qntls. of molasses in their ER-1 return for November 2008. The Jurisdictional Deputy Commissioner confirmed the demand of Rs. 5,628/- and imposed a penalty of Rs. 3,000/- along with interest, relying on the judgment of the Allahabad High Court and the Apex Court. The Commissioner (Appeals) upheld this decision, leading to the current appeal.

2. The appellant argued that the loss was due to natural causes like evaporation and handling, falling well below the 2% limit prescribed for condonation in the Board's Circular. They cited a Tribunal judgment to support their claim that no application for remission was required in such cases. The Departmental Representative, however, emphasized the need for justifying the loss based on circumstances, in line with the Allahabad High Court's ruling.

3. The Tribunal, after considering both sides' submissions, noted that the loss was minimal (0.021%) compared to the total molasses production for the season. They found no evidence of clandestine removal and concluded that the loss, attributed to natural causes, should have been condoned. The Tribunal differentiated this case from the Allahabad High Court's judgment, citing a different Tribunal decision where losses due to natural causes up to 2% were condonable.

4. Ultimately, the Tribunal set aside the impugned order, allowing the appeal and ruling in favor of the appellant. The judgment highlighted that the loss being due to natural causes and not involving any illicit activity warranted condonation, rendering the penalty and interest imposition unjustified.

This detailed analysis of the judgment provides insights into the legal reasoning and application of relevant precedents in resolving the issues raised in the case.