ORDER
K. Sankararaman, Member (T)
1. The appellants are manufacturers of sugar and molasses attracting Central Excise duty and alcohol which is under the control of the State Excise authorities. Molasses which is a by-product in the manufacture of sugar is used as a raw material in the manufacture of alcohol. Molasses is stored in steel tanks as well as masonry tanks by the appellants. The Central Excise Officers visited the factory on 15-12-1992 and checked the stock of molasses kept in the storage tanks with the balance quantity on record. The Stock found was of 32391.63 quintals. This was compared with the balance recorded in the RG. 1 Register which was 27378.78 quintals. A quantity of 7059.19 Quintals had been notionally given to them for safe custody on 24-6-1992 under Superdogninama. Adding this quantity, the stock should have been 34437.97 Quintals. As only 32391.63 quintals were found physically available, a shortage of 2046.34 quintals of molasses was disclosed. After show cause notice and personal hearing the case was adjudicated by the Collector of Central Excise, Jaipur vide Order-in-Original No. 147/93, dated 13/18-8-1993 confirming the demand of duty of Rs. 35,299/- and imposing penalty of Rs. 10,000/-. The present appeal is against the said order.
2. Shri Manik Chand, learned Counsel for the appellants stated that the shortage has been arrived after taking into account the result of an earlier stock verification carried out in June 1992. That verification resulted in an artificial excess which has led to the alleged shortage in the present proceedings. It was their contention that the said excess was not really there as the dip measurement method followed by the Department was not reliable in arriving at the weight of the stored molasses. He cited Tribunal decision in Bajaj Hindustan Ltd. v. CCE, Kanpur reported in 1994 (72) E.L.T. 710 wherein the charge of excess stored based on dip measurement was dropped by the Tribunal. He pleaded that the appeal be allowed in view of the grounds set out in the appeal.
3. The plea was resisted by Shri D.S. Mallick, Departmental Representative. He supported the order. The shortage in question was admitted by the Chief Chemist of the appellant company. The Collector had considered their contentions and passed his order. The excess found in the earlier stock verification and the shortage found in the instant proceedings relate to different tanks and hence the shortage is not connected with the result of the earlier stock verification. He pleaded that the appeal be dismissed.
4. In a rejoinder, the learned Counsel for the appellants stated that the stock verification was not only with reference to some tanks. All tanks had been taken into account.
5. I have considered the submission made by both the sides. It is contended by the appellants that during the pumping in of molasses in the storage tank at a temperature of 50°C-60°C, as stated by the appellants there is lot of foam and fermentation which process continues during the storage period. During the summer months when the temperature is more, the molasses become less viscous and the density is less. As a result the volume increases. If the increased volume is taken into account and the normal density is applied, it is bound to give an increased weight which is only apparent and not real. That is what has led to the alleged excess during the June, 1992 stock verification. The subsequent stock verification was done in December, 1992 when the conditions were obviously different affecting the density, volume etc. In fact, during the original check, a -much larger excess weight was alleged by the Department in the first instance but when the mistake in the Department’s method of calculation was pointed out by the appellants the mistake was corrected and the excess alleged came down appreciably. The standard reference books on sugar industry indicate the possibility of error in estimating the weight of the dip measurement method. The same has been taken note of the Tribunal in the decision cited by the learned counsel. I have also seen other such decisions where appeals have been allowed by the Tribunal against orders arising from excess stock of molasses being alleged to be present in the storage tanks. As the basis for the shortage is the notional excess alleged in the earlier stock taking and as such an excess was subject to variation due to the change in season, the charge cannot be held to be sustainable. The plea raised by the appellants about the effect of the earlier stock taking on the subsequent one resulting in the alleged shortage has been met by the Collector on the ground that the earlier report and the subsequent one related to different tanks. The narration of the show cause notice and the order do not, however, accord with this finding. In the circumstances, I do not agree with the finding in the impugned order about the shortage of molasses. I accordingly set aside the same. The appeal is allowed.