2017 (5) TMI 458 - AT - Central Excise

Molasses lost due to mishap - demand - penalty - case of Revenue is that bursting of the molasses tanks in the factory was not an accident as claimed by the assessee but purely on account of negligence on the part of the assessee for not maintaining the tank as storage worthy - respondent contended that molasses was lost as a result of auto combustion which is a natural phenomenon which is beyond the control of the assessee - Held that - the accident which happened in the factory was as a result of negligence on the part of the respondent and lack of maintenance of storage tanks - inadequate maintenance of the storage tanks by the respondent stands confirmed - the duty demand on the quantity of molasses lost due to mishap is payable by the respondent. However, there is no justification to impose any penalty on the respondent. The respondent has not applied for any remission of duty to the Proper Officer inspite of the provisions in the Central Excise Rules for claiming remission on goods lost or destroyed either by natural cause or unavoidable accident. In the absence of any such claim for remission, the duty demand is required to be upheld. Appeal allowed - decided partly in favor of Revenue.

Summary

Issues:
- Duty demand on lost molasses
- Imposition of penalty
- Jurisdiction of the appellate Tribunal

Duty Demand on Lost Molasses:
The case involved a large quantity of molasses being drained out in the respondent's factory due to bursting of storage tanks, leading to a duty demand of ?13,02,240. The original authority confirmed the demand and imposed a penalty. However, the Commissioner (A) set aside the duty demand and penalty, stating that the molasses loss was due to auto combustion beyond the assessee's control. The Revenue challenged this decision, arguing negligence on the part of the assessee for not maintaining the tanks. The Tribunal found that the tank burst was due to poor maintenance by the assessee, confirming the duty demand but rejecting the penalty imposition, citing a similar case upheld by the Supreme Court regarding goods lost due to fire.

Imposition of Penalty:
The Tribunal held that the bursting of the molasses tank was a result of negligence and lack of maintenance by the respondent, leading to the duty demand being upheld. However, the Tribunal found no justification to impose a penalty on the respondent, considering the circumstances of the case and the confirmed structural deficiencies in the storage tanks.

Jurisdiction of the Appellate Tribunal:
The respondent raised the issue of jurisdiction under Section 35B [proviso (a)], arguing that the Tribunal had no jurisdiction in cases of loss of goods in storage. The Tribunal disagreed, citing a previous decision that allowed jurisdiction in cases of goods lost by natural causes or unavoidable accidents. Additionally, it noted that the respondent did not apply for remission of duty despite provisions in the Central Excise Rules, further justifying the duty demand upheld by the Tribunal.

In conclusion, the Tribunal partly allowed the appeal by the Revenue, upholding the duty demand of ?13,02,240 but dismissing the imposition of penalty based on the negligence and lack of maintenance by the respondent. The Tribunal affirmed its jurisdiction to decide the issue and highlighted the importance of following procedures for remission of duty in cases of goods lost or destroyed.