Whether remission of duty available if subject goods are unfit for human consumption?

PJ/CASE LAW/2015-16/2637

Case:- KAMREJ VIBHAG SAHAKARI KHAND UDYOG MANDLI LTD. VERSUS C.C.E. & S.T., SURAT-II

Citation:-2014 (303) E.L.T. 590 (TRI. – AHMD.)

Brief facts:-The relevant facts that arose for consideration were the appellant being manufacturer of sugar, made an application to the Jurisdictional Assistant Commissioner for disposal of Molasses on the ground that the said molasses has more than 50% of the water content and hence needs to be destroyed as unfit for human consumption, in the said application the appellant has sought the remission of duty. The said application was disposed of by the Adjudicating Authority by dismissing the claim for remission of the duty involved. Aggrieved by such an order appeal was filed before the first Appellate Authority. The first Appellate Authority rejected the appeal. Hence, the present appeal.

Appellant’s contention:- Ld. counsel submitted that both the lower authorities have erred in rejecting the remission application; he produced translation of letter dated 4-11-2011 issued by Inspector-Prohibition & Excise, Navi Pardi, Tal. Kamrej, Dist-Surat; wherein the appellant were directed to destroy the molasses which contained more than 50% of the water and was not usable and not in marketable condition. He submitted that in an identical situation Division Bench of the Tribunal in the case of Shakumbari Sugar & Allied Ind. Ltd. v. Comr. of EX. Meerut-I [2006 (206)E.L.T.497 (Tri. Del.)and Commissioner of C. EX., Meerut-II v. D.S.M. Sugar [2011 (267)E.L.T.554 (Tri. Del.)] had held that more than 50% water content in the molasses if declared unfit for human consumption and not marketable, duty needs to be remitted.

Respondent’s contention:- Ld. departmental representative on the other hand submitted that there was no finding to show that water content of 50% or more in molasses is unfit for human consumption and there was no link or key in the copy of the certificate issued by the said Excise Officer. It was his submission that there was nothing on record to show how this water entered into the tank making the molasses unfit for human consumption.

Reasoning of judgement:- The Commissioner considered the submissions made at length by both sides and perused the records. Undisputed facts were that appellant sought application for remission of duty on the molasses which was considered unfit for human consumption as per the test certificate issued by the Central Excise in Customs Laboratory in Vadodara. It was also undisputed that the Inspector-Prohibition & Excise had directed the appellant to destroy the said quantity of 430.830 M. Tones of molasses which waas stored in tank No. 1 separately. On perusal of the records, he found that the sample of molasses which was drawn by the Central Excise Department was sent to the Central Excise and Customs Laboratory in Vadodara, which was on the analysis; vide file No. RV/SU/78/41/7410, stated that the said sample of molasses does not conform to the density characteristics mentioned for Cane Molasses and the percentage of water content indicates 61.9. It was also seen from the letter dated 4-11-2011 from the office of the Prohibition and Excise Department of the Government of Gujarat which specifically directed the appellant to destroy the said molasses to the tune of 430.830. M. Tones as it contents more than 50% of the water, was not usable or not in marketable condition. Based upon such direction of the Prohibition and Excise Department, the appellant preferred an application before the authorities which stood dismissed without any justifiable reasoning. He found that the first Appellate Authority had rejected the appeal only on the ground that there was no “reliable link or key to the certificate issued by the State Excise Officers”. On perusal of the records, it transpires that the said certificate issued by the State Excise Department was directly relatable to the application made by the appellant and which was endorsed by a visit note of the Superintendent of the Central Excise along with State Excise Officers to the appellant’s factory. The said visit note was reproduced below :-
“As directed by the Asst. Commissioner, Central Excise & Customs, Division-OLPAD, Surat-II, I Superintendent, Central Excise & Customs, Range-V, Division-OLPAD, Surat-II, had visited the Factory Premises of M/s. Kamrej Sugar Factory for the purpose of verification of Molasses.
On visiting the Premises at 3.00 Hrs. on 26-4-2011, it found that as per Central Excise records the total stock of 430.830 M. Tones (Tank-1) reported as 430.830 M. Tones and As per the State Excise records, maintained by Inspector, State Excise, total stock of 430.830 M. Tones reported as 430.830 M. Tones.
Verification of the same in presence of State Excise Officer & Production Manger, total reading of 430.830 M. Tones-Tank-1 taken as 430.830 M. Tones which comes to 430.830 M. Tones. ”
On perusal of the above said visit note, it was found that there was link between the test report given by the Dy. Chief Chemical Examiner and the letter of the Inspector of Prohibition Excise as regards the contents of Molasses 430.830 MT. in tank No. 1 of the appellant factory. Since it was an admitted fact that the said molasses contents more than 50% of the water and is not usable and not marketable, the application for the remission of the duty liability needs to be allowed inasmuch, as when the goods which are indicated as unfit for human consumption, needs to be destroyed. It was common knowledge that molasses were destroyed in the present of State Excise Officers.
Accordingly, in his view, the decision of the Tribunal in the case of Shakumbari Sugar & Allied Ind. v. Commissioner of C. EX., Meerut-I, was directly applicable, wherein the bench held as under :-
“After hearing both the sides, and after considering the detailed factual position, as discussed above, it is seen that the drainage of molasses was, in fact of watery molasses which were declared to be unfit for human consumption. As per the appellant the same was, in fact, not marketable and hence not excisable molasses. Inasmuch as the same was mainly water mixed with molasses leaked from the valve of tank No. 1. As such there was no requirement for the appellant to seek any remission of duty from the Revenue. In any case such drainage was conducted under the supervision of the State Excise authorities with due intimation to the Central Excise authorities, in which case it would amount to deemed application for remission of duty. Even in their reply to the show cause notice, the appellant had contended that if duty is required to be paid on the said molasses, the same should be remitted. Inasmuch as, the molasses were declared to be unfit for human consumption. In this situation, we are of the view that the demand of duty on the drained out quantity of molasses is not justified.”
In view of the foregoing, he found that the impugned orders were liable to be set aside.

Order was set aside and appeal was allowed.

Decision:-Appeal allowed.

Comment:- The gist of this case was that molasses were unfit for human consumption and were not in marketable condition and so were destroyed in the presence of Central Excise Officers. Further, as the molasses were destroyed, the remission from excise duty is available to the assessee in view of the decision of the Tribunal in the case of Shakumbari Sugar & Allied Ind. v. Commissioner of C. EX., Meerut-I. Hence, excise duty in respect of the said goods was allowed to be remitted.

Prepared by:- Prayushi Jain

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PJ/CASE LAW/2015-16/2637

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