Customs, Excise and Gold Tribunal - Delhi
Kesar Enterprises Ltd. vs Cce on 26 November, 2002
Equivalent citations: 2003(86)ECC652, 2003(155)ELT100(TRI-DEL)
JUDGMENT P.G. Chacko, Member (J)
1. The appellants are manufacturers of VP sugar, Molasses is their bye-product, which is stored in steel tanks. It is stated that, insofar as the sugar industry is concerned, the relevant period is November to October, which is called "sugar season" in the industrial parlance. During the sugar season 1997-98, the department through its officers checked the stock of molasses in the appellant's storage tank Nos, 2 and 3. Shortages of 2390.41 Qtls. and 1034.95 Qtls. were detected in tank Nos. 2 & 3 respectively, the two totalling to 3425.36 Qtls. On 30.10.98, the stock of molasses in tank No, 3 was cleared on payment of duty. On 31.10.98, the appellants also paid duty of Rs. 51,747.50 on the quantity of 1034.95 Qtls. of molasses found short in tank No. 3. On 23.11.98, the appellants filed with the jurisdictional Assistant Commissioner of Central Excise an application for remission of duty on the said quantity of 1034.95 of molasses, on the ground that the said quantity was lost due to natural causes beyond their control. In that application, they, inter alia, submitted that the loss worked out to 1.83% which was below the permissible limit of 2%. The jurisdictional Commissioner, by show-cause notice dated 6.9.2001 proposed to reject the remission application on the alleged ground that it was an afterthought of the party to "escape from the offence detected by the Central Preventive Officers of Central Excise Commissionerate, Kanpur-ll (now Lucknow) on 28.10,98". The appellants resisted the proposal. The Commissioner, adjudicating the dispute, upheld the department's allegation that the remission application was only an afterthought, and rejected the application. Hence this appeal.
2. It appears from the record of this appeal that, during the pendency of the remission application before the Commissioner, the department had, by show-cause notice dated 16.3.99, demanded duty of excise on the molasses found short in the two tanks on 28.10.98. That demand was contested by the party. The jurisdictional Dy. Commissioner who adjudicated that dispute dropped the demand after holding that there was no evidence of clandestine removal in the case. It appears that the decision of the Dy. Commissioner has become final and binding. There was a condition in the Dy. Commissioner's order to the effect that, if the remission application of the party was rejected by the Commissioner, the duty on the 3425.36 Qtls. of motasses should be paid within 10 days such other time as prescribed.
3. Heard both sides. Ld. consultant submits that, even if the department had not checked the stock of molasses and found shortages thereof on 28.10.98, the appellants on their own accord would have detected the shortage at the time of clearance of the goods on 30.10.98 and would have subsequently filed remission application. The remission application was filed on 23.11.98, within a period of one month from the date of stock verification. There was no period of limitation prescribed for such application under Rule 49 of the Central Excise Rules, 1944. The department's allegation was that the application was filed as an afterthought so as to cover up the shortage detected by the department. The tenor of the allegation was that the remission application purported to cover up clandestine removal. Clandestine removal has since been ruled out by the Dy. Commissioner. The order of the Dy. Commissioner has become final and binding. Even otherwise, the consultant submits, there was no departmental allegation of clandestine removal on or after 28.10.98 so as to prompt the appellants to cover that up. The allegation to the effect that the appellants had clandestinely removed molasses was raised by the department for the first time in its show-cause notice dated 16.3.99. The remission application was filed long before that. Therefore, on the facts of the case, the allegation raised in the show-cause notice dated 6.9.2001 was not sustainable. It is the further contention of the consultant that, for a given sugar season, upto a maximum of 2% loss of molasses is permitted. In this connection, he relies on the Board's Circulars dated 6.2.82 and 18.7.83. The loss of molasses involved in this case was admittedly less than 2%. The Commissioner ought to have allowed remission of duty on that shortage. Ld. consultant has also relied on a few decisions of this Bench:
(i) U.P. State Sugar Corporation Ltd. v. CCE, Allahabad, 2000 (69) ECC 211 (T) : 2000 (117) ELT 83
(ii) Seksaria Biswan Sugar Factory Ltd. v. CCE, Lucknow, 2001 (135) ELT 1024
(iii) Balrampur Chini Mills Ltd. v. CCE, Chandigarh, 2002 (49) RLT 59
4. Ld. JDR has focused on 'afterthought'. His submission is that the remission application was filed after about one month after the shortages of molasses were detected by the department. They delay was not satisfactorily explained to the adjudicating authority. Under the first proviso to Sub-rule (1) of Rule 49, the sugar manufacturer had a burden to satisfy the proper officer about the loss or destruction of goods by natural causes. Ld. DR, therefore, seeks to justify the Commissioner's order
5. I have examined the rival submissions. I find that the only allegation raised in the show-cause notice was that the remission application had been filed, in an afterthought, by the appellants in an attempt to cover up the shortage detected by the officers of Central Excise on 28.10.98. The department has no case that the shortage detected by the officers exceeded 2%. In the application for remission, the appellants had categorically stated that the loss of molasses was to the extent of 1.83%. This plea of the appellants has not been rebutted by the Commissioner. It has, therefore, to be held that the adjudicating authority has accepted the appellant's plea that the loss of molasses was below of 2%. The Instructions of the Board, as laid down in the cited circulars, were to the effect that losses of molasses upto a maximum limit of 2% should be condoned. That the circulars of the Board were binding on the Commissioner, who adjudicated the dispute in this case, need not be over-emphasized. The Supreme Court's decision in Paper Products Ltd. v. CCE, 1999 (66) ECC 36 (SC): 1999 (112) ELT 765 (SC) had settled this position.
6. Yet another infirmity in the impugned order is that the Commissioner apparently lost sight of the scope of the allegation in the show-cause notice. In one place, the notice alleged that the claim of storage loss prima facie appeared to be an afterthought and an attempt to cover up the shortage detected by the preventive party on 28.10.98. In another place, it was alleged that the party sought to apply for remission to escape from the offence detected by the officers on 28.10.98. When the Board itself took note of the highly probable incidence of shortage of molasses in sugar industry, it could not be reasonably held that the appellants attempted to cover up the shortage detected by the officers on 28.10.98, Shortage of molasses by itself was no offence. As a matter of fact, shortages were permissible upto 2%. Hence there was no question of any attempt to cover up any shortage. When shortages of molasses in sugar Industry have been recognised as a fact by the Board as also judicially taken note of by this Tribunal in cases like those cited by the consultant, the allegation raised In the show-cause notice does not have any leg to stand on. Consequently, the Commissioner's order upholding such allegation cannot be sustained in law. In the result, the impugned order is set aside and the present appeal is allowed, with consequential reliefs to the appellants.