ORDER
Shiben K. Dhar, Member (T)
1. This is an appeal filed by M/s. Sarjoo Sahakari Chini Mills Ltd. Belrayan, Lakhimpur Kheri (U.P.) against the order-in-appeal No. 463-CE./KNP/91 dated 29-10-1991 of Collector (Appeals), Allahabad.
2. The appellants are engaged in the manufacture of sugar at Belrayan, Lakhimpur. During the sugar season 1982-83, the appellants stored 1,10,727 quintals of [molasses] obtained in the factory in Katcha temporary pits as pucca tanks were already full. The appellants in the meantime had sought Central Excise permission for storing molasses in Katcha pits. This permission was granted by the Superintendent on 5-5-1983 with the condition that permission would be valid upto May, 1983. During June and July, 1983 because of heavy rains and floods, the appellant contended that nearly 80,000 quintals of molasses stored in temporary Katcha pits were washed away and the remaining got unfit for consumption. The appellants were served with Show Cause Notice demanding duty amounting to Rs. 3,48,790.05 on 1,10,727 quintals of molasses which was alleged to have been removed without payment of duty. The Assistant Collector vide his order dated 20-11-1988 held that the appellants had not received any permission to store molasses in katcha pits beyond 31-5-1983 and they had not applied for remission of duty on the molasses claimed to have been destroyed and rendered unfit for consumption. The duty on 1,10,727 quintals of molasses was payable and accordingly confirmed the demand for Rs. 3,48,790.05.
2.2 In his order dated 20-12-1988, the Collector (Appeals) Allahabad held that since the authorisation to store molasses was valid upto 31-5-1983, duty was correctly demanded from the appellants under Rule 9(1) of Central Excise Rules, 1944. He held that storage of molasses in katcha pits was unauthorised under Rule 47 of Central Excise Rules, 1944 and amounted to removal under Rule 9(1). In regard to appellant’s plea that out of the said molasses 86,000 quintals was destroyed in rain water, he observed that assuming that this loss occurred, it only shows carelessness on the part of the appellants as the appellants do not seem to have taken any precaution to shift these molasses to steel tank immediately after the expiry of permission granted by the Superintendent and that if this had been done, the loss could have been avoided. He also observed that the appellants failed to apply to the Collector for remission of duty on the molasses claimed to have been lost in rain water. The Collector (Appeals), therefore, rejected the appeal and confirmed/upheld the order of the Collector.
3. Ld. Advocate Shri J.S. Agarwal submitted before us that they were given permission to store molasses upto 31-5-1983 and that they had also made request before the expiry of this permission, to the Superintendent for extension of permission. Molasses were destroyed due to floods caused by heavy rains during June and July, 1983. There has been no removal as such within the Rule 49. Duty can be demanded within the frame-work of Rule 49 only at the time of actual removal and in this case since the molasses were destroyed and remaining got unfit for consumption there is no removal as such. The Advocate admitted that they did not apply to the Collector for remission of duty. In support of his contention, the Counsel relied on cases reported in
1987 (29) E.L.T. 22
1993 (66) E.L.T. 513 (Tri.)
1984 (18) E.L.T. 606
1990 (49) E.L.T. 534
He submitted that x xx xx xx xx x these citations would support his plea that duty can be demanded only when there is actual removal and no duty can be demanded in case goods are lost or destroyed due to natural causes. In their case since molasses of 82-83 season are destroyed due to heavy rains, Rule 49 is not applicable.
3.2. Ld. D.R. Shri V.C. Bhartiya submitted that the appellants have not produced any evidence indicating any request for extension of permission to continue the storage of molasses in Katcha Pits beyond 31-5-1983; nor there is anything on record to show that they had applied for extension of permission. No such application has been produced. He drew our attention to page 16 of the paper book and particularly para ‘4’ of the letter dated 15-9-1983 of the appellants. In para ‘4’, the appellants wrote to the Asstt. Collector :
“We have never objected either to execute the bond or even to deposit the duty against the demand raised by you, irrespective of complete destruction of molasses and no sale whatsoever.”
Ld. D.R. also submitted that the appellants never applied for remission of duty on molasses claimed to have been lost due to floods. In regard to case laws cited by the appellants, Ld. D.R. submitted that facts are distinguishable as in such cases either permission has been granted or the fact of destruction otherwise was not in dispute.
4. We have carefully considered the submission made by both the sides. Ld. Counsel admitted that the molasses continued to remain in Katcha pits without permission beyond 31-5-1983; but Ld. Counsel submitted that molasses were destroyed due to floods and seepage and he admitted that they had not applied to the Collector for remission of duty on such molasses as were destroyed due to natural causes. The facts as discussed in the case laws cited by the Ld. Advocate are somewhat distinguishable. In these cases permission had either been given or the fact of destruction through natural causes had been admitted by the Department itself. In case of Shri Dudhganga Vedganga Sahakari Sakhar Karkhana Ltd. v. Collector of Central Excise, Pune &Aurangabad reported in 1987 (29) E.L.T. 22, the Tribunal observed that it is for the sugar factory to establish with such evidence that loss of molasses stored in katcha pits was due to natural causes. The Tribunal thereafter with reference to records observed that Collectors themselves were satisfied that the molasses in fact had been destroyed due to natural causes. Relevant paras are reproduced :
“35. As the points referred to above are inter-related, they are considered together. It was the contention of the sugar factories that the Molasses stored in katcha pits which is the subject-matter of appeals ED (Born.) 33/84, ED (Bom.) 69/84, ED (Bom.) 91/84 and ED (Bom.) 123/84, were washed out due to excessive rains. The Molasses stored in katcha pits which are the subject-matter of appeals ED (Bom.) 95/84, ED (Bom.) 32/85 and ED (Bom.) 71 /85 got destroyed due to internal combustion. It was also the contention of the Sugar factories that the Molasses stored in katcha pits which are the subject-matter of appeals ED (Bom.) 197/84, ED (Bom) (18/85), ED (Bom.) 68/85, ED (Bom.) 103/85 to ED (Bom.) 105/85 and ED (Bom.) 187/85, became unsuitable for distillation. It is for the sugar factories to establish by satisfactory evidence that the loss of Molasses stored in katcha pits was due to natural causes. We had in paragraphs 8 to 31 referred to the statements contained in the orders passed by the two Collectors against which the above-mentioned appeals were preferred. The Collector, Pune, in his order which is the subject-matter of appeal ED (Bom.) 33/84 had categorically stated that “due to heavy rains from 26-6-1983 to 28-6-1983,1531.540 M/T of Molasses belonging to M/s. Shree Dudhaganga Vedganga Sahakari Sakhar Karkhana Ltd., which was preserved in pit Nos. 1 and 2 was washed away”. It was also stated in his order “on receipt of the intimation from the factory, Superintendent, Central Excise, Bidri, visited the factory and found that the incident had occurred due to natural calamity and not on account of any “mischief”. Thus it could be said that the loss of Molasses which is the subject-matter of appeal ED (Bom) 33/84 was due to natural causes.
36. In his order which is the subject matter of appeal ED(BOM)69/84, the Collector, Aurangabad, had referred to the report of the Chief Chemist of M/s. Kada Sahakari Sakhar Karkhana Ltd., about the flowing of Molasses from Kaccha pit No. 5 which had happened due to tumbling down of one corner of the said pit. He had also stated that the Superintendent, Central Excise, Beed, visited the factory on 27-5-1983 and after investigations, it was found that one corner between south and west of pit No. 5 was in broken condition and Molasses inside pit no. 5 was flowing upto 1 Km. away towards west side of the said pit. The quantity of Molasses lost in the damage worked out to 1202.180 M/T. From the facts narrated it is clear that the Molasses was not removed by the factory but was lost due to tumbling down of one corner of the kaccha pit. The Collector, no doubt, had held that if proper care had been taken, there would not have been any loss. We will come to that part of the finding later. But the facts narrated by the Collector clearly show that it was not due to human agency that loss had occurred. Therefore, it could be said that the loss was due to natural causes.”
It is in this context that Tribunal held that point of time to collect the duty is at the time of removal of goods; if there is no removal of goods, no question of duty arises for removal was positive act. In case reported in 1993 (21) E.T.R. 331, the molasses were actually destroyed and permission of storage was controlled by the State Excise Authorities.
4.2 We find from the records before us that neither the appellants applied for the remission nor there was any serious attempt made to verify whether the entire quantity of molasses was destroyed either due to floods or seepage. The Asstt. Collector in the operative part of the order considered all the facts and in findings, concluded “I find that assessee has not applied for remission after following required procedure. Besides, the entire quantity of molasses was destroyed in rain (Flood) water and there was also seepage in tank. Both the things could have been controlled by them.” And then on these grounds the Asstt. Collector confirmed the demand.
4.3 The Collector (Appeals) also observed apart from the remission, that even if it is assumed that molasses were destroyed due to natural causes, this could have been prevented by the appellants by taking timely action and transferring the goods to the pucca tanks. It is clear from order of both the Asstt. Collector and the Collector (Appeals) that they have not satisfied themselves whether and to what extent the loss has been caused from the natural causes. While the * * “Collector has referred to the fact of appellants not having applied for remission after following the required procedure, the Asstt. Collector observed “the entire quantity of molasses was destroyed in rain (flood) water and there was also seepage in tank. Both the things could have been controlled by them.” With these observations alone he confirmed the demand. Collector (Appeals) in his order dated 29-10-1991, while referring to appellants’ plea that out of the molasses stored, 86,000 quintals got destroyed in rain water, observed that assuming this loss occurred, it only shows carelessness on the part of the appellant.
Rule 49(1) provides “payment of duty shall not be required in respect of excisable goods made in a factory until they are about to be issued out of the place or premises specified under Rule 9 or are about to be removed from a store-room or other place of storage approved by the Collector under Rule 47”. The first proviso reads “provided that the manufacturer shall on demand pay the duty leviable on any goods which are not accounted for in the manner specifically provided in these rules, or which are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accident during handling or storage in such store-room or other approved premises”. The second proviso to this rule reads “provided further that the proper officer may not demand duty due on any goods claimed by the manufacturer as unfit for consumption or for marketing subject to such conditions as may be imposed by the Collector by order in writing.”
4.4 It is, therefore, clear that Rule 49 clearly enjoins that payment of excise duty shall not be required unless excisable goods are about to be issued out of the place or premises specified under Rule 9 or are about to be removed from store-room approved by the Collector under Rule 47. xx xx xx xx xx xx xx xx xx xx xx xx xx xx. As observed by the Tribunal in the case of Shri Dudhganga Vedganga Sahakari Sakhar Karkhana and Ors. reported in 1987 (29) E.L.T. 22 (Tri.), if there is no removal, there will be no question of payment. In this case, therefore, following the ratio of this order, we are of the view that since loss or destruction is not removal, no duty would be payable on such quantity of molasses as is shown to the satisfaction of proper officer to have been lost or destroyed by natural causes. As we have observed earlier, there is no clear finding whether the authorities below satisfied themselves about the loss or destruction due to natural causes. They seem to have proceeded on the presumption that even if molasses are lost due to natural causes, the loss could have been prevented and since appellants have not applied for remission, duty could be demanded. Since we have already held that no duty can be demanded in case goods are lost through natural causes, we remand this case to the Collector, Central Excise with the direction to satisfy himself on the basis of relevant records and such other evidence as may be available including any verification report pertaining to the period when the appellants wrote to the department about loss of molasses, and direct that no duty be demanded on such quantity of molasses as is shown to have been lost or destroyed due to floods or other natural causes or which is rendered unfit for consumption, xxxx In case duty has already been paid, consequential relief to that extent be given. The appeal allowed by way of remand.