Custom, Excise & Service Tax Tribunal
M/S. Balrampur Chini Mills Ltd vs Commissioner Of Central Excise on 14 June, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
COURT NO. III
Excise Appeal No. 1690 of 2009-SM(BR)
[Arising out of Order-in-Original No. MP[3/2009-TECH] 3/2009 dated 20.3.2009 passed by the Commissioner of Central Excise , Allahabad ]
For approval and signature:
Hon'ble Mr. M. Veeraiyan, Member (Technical)
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 :
of the CESTAT (Procedure) Rules, 1982 for
publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair :
copy of the Order?
4. Whether Order is to be circulated to the :
Departmental authorities?
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M/s. Balrampur Chini Mills Ltd. Appellants
Vs.
Commissioner of Central Excise Respondent
Allahabad
Appearance:
Shri Vikrant Kakria, Advocate for the Appellants
Shri K.P. Singh, DR for the Respondent
Date of Hearing/decision : 14.6.2011
ORAL ORDER NO . ________________________
Per M. Veeraiyan:
This is an appeal against the order of the Commissioner No. MP[3/2009-TECH] 3/2009 dated 20.3.09.
2. Heard both sides.
3. The relevant facts, in brief, are that the appellants, a manufacturer of VP sugar and molasses, vide their application dated 18.11.05, sought for remission of Central Excise duty on 993 MT of molasses pertaining to sugar season 2004-2005. The Assistant Commissioner Central Excise Division, Faizabad issued show cause notice dated 2.11.2006 proposing rejection of remission and demanding duty of Rs.7,60,341/- along with interest and proposing penalty under Section 11AC read with Rule 25 of Central Excise Rules. It was also alleged in the show cause notice that the appellants have failed to intimate the jurisdictional Central Excise officer within the prescribed time limit about the fact of shortage of molasses to avoid physical verification. The appellants vide their letter dated 28.12.06 contested the demand and in particular submitted that they had filed intimation within the time limit prescribed. The Commissioner did not accept remission and confirmed the demand of duty as proposed in the show cause notice along with interest and imposed equal amount as penalty under Section 11AC and Rs.10,000/- as penalty under Rule 25 of the Central Excise Rules, 2002.
4. Learned Advocate for the appellants submitted that the materials were stored in different steel tanks. Their weight have been taken only on the basis of dip reading method which is a permissible method. The actual loss due to evaporation would be known only when the tanks would be emptied. Since the shortage was noticed, within 24 hours, the intimations have been sent as required and the intimations have been duly acknowledged by the jurisdictional Central Excise officers. He also submits that in terms of Boards circular No. F.No. 261/15/CC/ 1/80-CX-8 dated 6.2.1982, losses upto 2% will be condoned irrespective of whether molasses were stored in kuccha pits / steel tanks or pacca tanks. Therefore, the denial of remission and consequent demand of duty was not justified. He further submits that there is no evidence of any removal of alleged short found goods and therefore the question of imposing any penalty under Section 11AC or Rule 25 does not arise.
5.1 Learned SDR strongly supports the order of the Commissioner. He has taken me through the relevant portions of the order of the Commissioner. In particular, drawing my attention to the statement of the assessee he submits that the weight of molasses was calculated by dip reading method and any increase in volume at the time of storage show higher weight. He also submits that the assessee has not produced any evidence to show that the actual weight of molasses stored at the time of storage was less than the recorded weight. He also submits that 2% of storage loss of molasses is upper limit for the purpose of remission of duty and the same cannot be claimed as a matter of right.
5.2 In this regard, he relies on the decision of the Honble High Court of Allahabad in the case of CCE, Allahabad vs. Balrampur Chini Mills Ltd. reported as [2008 (223) ELT 34 (All) wherein it has been held that the circular cannot be interpreted to mean that every producer as a matter of right be entitled to 2% of annual production as storage loss irrespective of facts and circumstances of the case. He also submits that the appeal filed by the party against the said decision was dismissed.
6. I have carefully considered the submissions from both sides and perused the records. The show cause notice has been issued proposing rejection of remission and consequently proposing demand of duty. The show cause notice specifically alleged that party has failed to intimate the jurisdictional Central Excise officer within the prescribed time limit. This allegation has been contested by the assessee by producing evidence in the form of letters duly acknowledged by the jurisdictional Central Excise officer. This submission has also been noted by the Commissioner in para 5 titled defence reply. However, the Commissioner has not dealt with this crucial defence submission. The Commissioner has denied remission holding that 2% storage loss of molasses could not be claimed as a matter of routine or right without justifying the natural causes. The appellants have not claimed remission at a flat rate of 2% of the quantity stored in the steel tanks. Varying percentage of shortages has been duly intimated during the period May, 2005 to November, 2005. Subsequently in November, 2005, remission was sought for and the reason for shortage has been given as due to natural causes like evaporation losses. The Board have applied their mind to this issue and issued guidelines in the year 1982 stating that storage loss upto 2% may be condoned irrespective of whether the molasses were stored in Katcha pits or pucca pits. Apparently the Board has taken into consideration the ground reality before issuing such circulars. The storage loss claim relates to the period from May, 2005 to November, 2005 and the bulk of the period was summer months. The decision of the Honble High Court in the case of Kesar Enterprises Ltd. vs. CCE, Meerut II reported as [2008 (221) ELT 329 (All) relate to losses for the period between 28.10.98 to 19.1.99. Honble High Court has specifically noted that period being winter season, such large amount of shortage could neither be justified by foam formation due to natural heating nor evaporation to any appreciable extent. In the said case Honble High Court had dealt with dispute of shortage conducted by dip reading measurement method. In that context, the Honble High Court had held that plea for remission without any further examination or question is not justified and that as a matter of right, the assessee therein was not entitled to write off 2% of annual production as storage loss irrespective of facts and circumstances.
7. The facts of the above case are distinct from the facts of the present case. As already mentioned, this is not a case involving claim of flat rate of 2% of storage loss. It is a case of periodically intimating the storage loss which incidentally happened to be well below the guideline rate of 2% loss prescribed by the Board. The Commissioner is right while saying that the appellants cannot claim the remission upto 2% as a matter of right. At the same time, it was not proper to disregard the facts and circumstances of the case and deny the remission. It is not the case of the department that there can be no evaporation loss at all especially during the months of summer. For example, there was losses in May, 2005 which related to production of earlier months. Similarly, the losses noticed in November, 2005 related to period prior to November, 2005. Substantial period for which the there was storage loss is undisputedly for summer months unlike in the case of Kesar Enterprises Ltd. (supra) relied upon by the department.
8. Further in a case like this, where remission is sought to be denied, the question of treating whatever was found short as having been cleared clandestinely and invoking the provisions of Section 11AC and imposing the equal amount of penalty is not at all justified.
9. The weight and volume as recorded was based on determination by dip reading methods and said method also involve some approximation. This method is adopted inevitably and used for ascertaining the weight and evaporation loss and the Board has prescribed the maximum loss of 2% to be condoned. In view of the above, the denial of remission and consequent demand of duty are not justified. The main ground on which the show cause notice was issued was that no intimation was filed by the appellant which was found to be factually wrong.
10. The order of the Commissioner is set aside and the appeal is allowed with consequent relief as per law.
( M. Veeraiyan ) Member(Technical) ss 2