Customs, Excise and Gold Tribunal - Bangalore
Commr. Of C. Ex. vs Amdalavalasa Co-Op. Sugars Ltd. on 5 December, 2006
Equivalent citations: 2006(107)ECC16, 2006ECR16(TRI.-BANGALORE), 2007(210)ELT702(TRI-BANG)
ORDER S.L. Peeran, Member (J)
1. This Revenue's appeal arises from the Order-in-Appeal No. 36/2004 (V-1) CE dated 29-9-2004, by which the Commissioner (Appeals) has held that there was no removal of diluted and damaged molasses which was lying in an open pit. The assessee themselves brought this fact to the notice of the Department. On the basis of the information supplied by them, the Revenue proceeded to recover duty from them on the alleged removal of the molasses from 'katcha pits'. However on the basis of the Order-in-Original and the contention raised by the assessee, the Commissioner (Appeals) has found that the Revenue did not produce any evidence of removal of diluted and damaged molasses which quantity is 326.410 MT lying in the open pits. The findings recorded in Paragraphs 6 to 12 of the impugned order are reproduced herein below:
6. I have carefully examined the issue. The short point to be decided is the sustainability of the impugned order on the grounds on which the demand is confirmed, in light of statutory provisions vis-a-vis facts.
7. The entire proceedings have brought into light only the following:
(i) that excess molasses existed on measuring the quantity in the tanks on 12-9-2001 vis-a-vis that recorded in production register, which was promptly accounted for in the production register with a narration by the appellant; and
(ii) that both the Appellant and the Departmental authorities failed in implementing the instruction contained in the last paragraph of Board Circular No. 35/88-CX dated 1-8-1988, which is in vogue during the material period; that "sugar factories should no longer be permitted to store molasses in katcha pits". Board Circulars are binding on Departmental Officers, and the Respondent has not outlined the steps taken to implement the Board instructions contained in Circular No. 35/88-CX dated 1-8-1988 in respect of the appellant.
8. The department's contention on the revenue loss arising from negligent storage in open pits leading to deterioration and lowering of commercial value has been adequately addressed by Hon. Tribunal in the case of Goavari Sugar Mills Ltd. v. Collector of C. Ex. (Tribunal) paragraph 6; Puma Shakari Sakhar Karkhana Ltd. v. CCE, Aurangabad , Paragraph 4 and Commr. of C.Ex., Patna v. Cownpore Sugar Works Ltd. 2001 (137) E.L.T. 577 (Tri. - Kolkata), paragraph 4.
9. The RO's presumption that remission was intended in the appellant's letter dated 11-6-2001 has been adequately clarified by the appellant in his letter dated 22-6-2001 wherein the appellant has committed that duty shall be discharged on the clearance of disputed quantity of molasses stored in the pit, and that buyers had been identified. I find from the records that the appellant has informed the Department that the disputed quantity has been pumped into the Tanks from the storage Pits, vide their letter dated 12-9-2001. This resulted in diluted molasses arising from mixing of the molasses pumped from the pits into the storage tanks with the better quality molasses stored directly in the tanks. Subsequently, the appellant has submitted a letter dated 1-11-2002 to the Department, showing invoice-wise particulars of clearances of molasses made from the tanks on payment of duty between 14-9-2001 and 22-9-2001, covering almost the entire disputed quantity. The department is therefore aware of the fact that the quantity available in the storage tanks includes the disputed quantity pumped in from the open pit (appellant's letter dated 12-9-2001) end cleared on payment of duty (appellant's letter dated 1-11-2002). In the case of Harinagar Sugar Mills Ltd. v. Collector of Cus and C. Ex. , Hon. Tribunal held:
'Removal without payment of duty' denotes a positive action Cancellation of permission to store molasses in Kutch pits does not amount to constructive removal for the approved place of storaga in violation of Rules 9 and 49 of Central Excise Rules, 1944.
Demand - Duty cannot be demanded unless excisable goods are to be issued out of place of manufacture of storage - Liability to duty not the same thing as liability to pay duty - Rules 9 and 49 of Central Excise Rules, 1944.
10. The ratio of the case law cited is applicable to the instant case, inasmuch as the impugned order has not evidenced the illicit removal outside the factory; and the appellants contention that re-arrangement of excisable goods within the factory is not violative of the provisions, especially when it has been communicated to the department. Therefore, the duty demand on the disputed quantity for a second time based on an allegation that the disputed quantity did not exist at all and attributable to a figment of imagination is not legally sustainable.
11. The allegations in the show cause notice refer to violation of Central Excise Rules, 2002, which camp into operation with effect from 1-3-2002. The Rules in vogue during the material period are those notified under Notification No. 30/2001-CE (NT) dated 21-6-2001. However, wrong citation does not take away the validity of the allegation as held in a number of judgments; and the Rule Numbers in both cases contain the same text. The SCN alleged violation of Rule 4, which requires clearance to be made on payment of duty in the manner laid out in Rule 8, which again is made applicable to clearances out of the factory. There is nothing to evidence the clearance of the disputed quantity outside the factory without payment of duty. In fact, the circumstantial evidence read with facts show that the disputed quantity has either been cleared on payment of duty, considering clearances between 14-9-2001 - 22-9-2001; or is still part of the RG-1 stock, considering the appellant's letter dated 12-9-2001, whose veracity is undisputed. Therefore, violation of Rule 4 has not occurred. Similarly, Rule 21 deals entirely with remission of duty, which, as discussed earlier, is out of purview of this appeal, and is not sought at all be the appellant. Ergo, violation of Rule 21 has not occurred in the instant case. Rule 12 specifies the due dates for filing of periodical returns. There is nothing on record to show that returns were filed beyond the due date or that the appellant failed to submit any returns. Admittedly, a misstatement on the quantum of production of Molasses furnished in the returns is being referenced, but this is not a violation of Rule 12. It has also been discussed in my findings at the outset that the disputed quantity has been overlooked, although the appellant assumes greater responsibility, having come under self-assessment procedure. Nevertheless, a charge of willful misstatement in the returns with intent to evade payment of duty is not sustained, since the proceedings emanated from a reference made by the appellant himself. As far as violation of Rule 10 is concerned, I find that the appellant has indeed failed in maintaining a proper daily stock account, even as admitted by him before the lower authority during the adjudication proceedings.
12. In summary, therefore, I find that the demand for duty and attendant interest in the impugned order is not legally sustainable. The corresponding portions of the impugned order is set aside. However, I find that Rule 10 of the said Rules has been violated, although no mens rea is evidenced, justifying a minimum penalty under Rule 25. The penalty imposed is upheld.
2. The Revenue's contention in this appeal is that as the appellants had shown excess stock in RG 1 Register, they arrived at the conclusion that there was clandestine removal of diluted and damaged molasses. The learned JDR took me through the 'Grounds of the Appeal' and the Order-in-Original and prayed for confirming the demand.
3. The learned Consultant filed a written reply. He submits that there was no removal of molasses and the Commissioner (Appeals) was justified in setting aside the demand. He relies on large number of judgments to support the plea that the demand cannot be confirmed in the matter as there was no evidence of alleged removal of the diluted molasses from the katcha pits. He further submits that the said quantity of molasses were in diluted and damaged condition and they were lying in katcha pits for several years. The same was not marketable and could not be used by anyone. Therefore the extracted portion of the order of the Commissioner (Appeals) is sustainable.
4. On a careful consideration of the submissions made by both the sides, I notice from the Order-in-Original that there is no evidence produced by the Revenue with regard to the removal of molasses from the open pits. The molasses were in the open pits in diluted and damaged condition for several years. It was not in marketable condition at all. Therefore, the contention of the Revenue that the same has been removed on the basis of some entry in RG 1 Register is a mere presumption. The excise duty cannot be confirmed on the basis of such presumptions. For not maintaining the correct quantity in the RG 1 Register, the assessee has been penalized by imposing penalty of Rs. 10,000/-. This has not been challenged by the assessee. The Commissioner (Appeals) has also followed the ratio of the Tribunal judgments as noted in the extracted portion of the findings. I do not find any infirmity in the Commissioner's (Appeals) order. There is no merit in the appeal and the same is rejected.
(Pronounced and dictated in the open court)