1991 (5) TMI 175 - AT - Central Excise

Summary

Issues:
Appeal against duty demand for molasses produced in 1977-78 stored in katcha pit. Interpretation of contractual liability and duty under T.I. 68. Application of Rule 49 and second proviso. Permission to destroy unfit goods.

Analysis:
The appeal was filed against a duty demand for molasses produced in 1977-78 and stored in katcha pit, based on an order by the Collector of Central Excise & Customs, Aurangabad. The appellants, sugar manufacturers, argued that there was no restriction on storing molasses in katcha pits during that period under T.I. 68. They highlighted that the molasses had deteriorated and sought permission to destroy them, as they were unfit for marketing. The State Excise authorities were involved in the process, and the appellants had addressed the issue with them before the duty demand was issued.

During the proceedings, the appellants' advocate referred to relevant correspondence and argued that the contractual liability for duty arose only after restrictions were imposed in 1980, which was after the molasses were stored. The advocate cited previous decisions in favor of the appellants to support their case. On the other hand, the JDR did not dispute the facts but emphasized that the production in this case was from 1977-78, questioning the need to store a large quantity for an extended period.

The Tribunal considered the contractual liability issue and the application of Rule 49 and its second proviso. It was noted that the molasses were stored before the special bond for duty remission was executed, raising doubts about enforcing contractual liability. The Tribunal referred to previous cases where it was held that duty recovery based on a special bond required a valid contract, which was absent in this case. Additionally, the second proviso to Rule 49 stated that duty need not be demanded for goods unfit for consumption or marketing, subject to conditions imposed by the Collector.

The Tribunal concluded that since the molasses were unfit for marketing and the appellants sought permission to destroy them, the duty demand was not justified. The proper officer could not demand duty in such circumstances, as per the provisions of Rule 49. The appeal was allowed, and the order of the Collector demanding duty was set aside.