2015 (2) TMI 1055 - AT - Central Excise

Demand of duty on clearance of excess quantity found on molasses found during the course of investigation - Held that - The allegation of excess unaccounted production of sugar is based on the alleged excess production of molasses and the quantity stored of molasses in the tanks has been determined by dip reading method. The method of dip reading is not full proof method as the volume of molasses may indicate the varying facts due to temperature. Therefore on the basis of excess molasses reported in their during stock taking it was not alleged that there was excess production of sugar. In the case of Oudh Sugar Mills vs. Union of India reported in 1962 (3) TMI 75 - SUPREME COURT OF INDIA it was held that allegation of clandestine production and clearance based upon the calculation of raw material fed into process are vitiated by error of law being based only on inferences involving unwarranted assumptions apart from the fact of excess quantity of molasses, there was virtually no other evidence to indicate clandestine removal of sugar. Admittedly apart from measurement of molasses by way of dip reading method, no other evidence has been brought on record for clandestine removal of sugar, Therefore, allegation against the appellant is not sustainable - Decided in favour of assessee.

Summary

Issues:
Appeal against duty demand on excess molasses clearance.

Analysis:
The appellant, a sugar and molasses manufacturer, was facing a duty demand on excess molasses clearance discovered during an investigation. The appellant had informed the department about the excess molasses found in the tanks during a measurement by the State Excise officer. However, it was revealed that the excess quantity of molasses was not added to the records, leading to allegations of concealing and clearing excess sugar stock without paying duty. The adjudicating authority initially dropped the demand, but the Revenue challenged this decision before the Commissioner (Appeals), resulting in the order being set aside. The appellant then appealed against this decision.

The appellant argued that the method used by the State Excise officer for measuring molasses, especially during the summer season when temperature fluctuations could affect volume, was incorrect. They had already informed the department about the excess molasses and expressed willingness to clear it by paying duty. Referring to a previous Tribunal order in a similar case, the appellant contended that the proceedings against them were not justified. On the contrary, the Revenue supported the findings of the impugned order.

After hearing both parties, the Tribunal considered the submissions. The appellant's counsel emphasized that the dip reading method used to measure the molasses volume was not foolproof, especially during temperature variations. They argued that the excess molasses reported to the department did not necessarily indicate excess sugar production, as alleged. Citing a precedent case, it was highlighted that allegations of clandestine production and clearance based solely on raw material calculations were legally flawed. The Tribunal noted the lack of substantial evidence besides the dip reading method to prove clandestine sugar removal. Consequently, the impugned order was set aside, and the appeal was allowed, providing for any consequential relief.

In conclusion, the Tribunal's decision favored the appellant, emphasizing the insufficiency of evidence to support the allegations of clandestine sugar production and clearance based on the dip reading method alone. The legal precedent and lack of additional proof led to the setting aside of the duty demand on excess molasses clearance.