ORDER
Lajja Ram, Member (T)
1. In this case, a quantity of 52,230 quintals of molasses involving Central Excise duty of Rs. 15,669/- was drained out by the appellants without following the proper procedure as prescribed for destruction of excisable and dutiable goods. The molasses in question were stored in outside pits and permission for such outside storage had been ob- tained. It is seen from the records that the molasses weighing 52,230 quintals had deteriorated and had become unfit for use. During the relevant time, the molasses was controlled by the State Excise Department and no quantity of molasses could be removed without their permission. Molasses is an important input for alcohol and the control by the State Excise Department appeared to be strict. The appellants sought permission from the State Excise Department for draining out of the damaged molasses. The permission by those authorities was granted. Thereafter, they intimated the Central Excise Department.
2. Shri H.P. Arora, Id. Advocate submitted that the Central Excise Department did not take any steps either to grant permission for the drainage or to supervise the drainage. The defective damaged molasses was drained out under the supervision of the State Excise officers. He pleaded that no duty could be demanded and no penalty could be imposed as the appellants were duty bound to comply with the directions of the State authorities in this regard.
3. Shri Vijay Singh, Id. SDR replied that the Central Excise officers had written back and had informed of the Central Excise formalities which were not followed by the appellant. He pleaded that in the circumstances the demand for duty and imposition of penalty was perfectly valid.
4. We have carefully considered the matter and have perused the records. There was a proper permission from the State Excise Department for draining out of the defective molasses. The draining out was also supervised by the officers of the State Government. There is no allegation that the molasses was disposed of clandestinely or had been removed to any buyer. It is a fact that the appellant had not followed the procedure as applicable for the destruc- tion of excisable goods but in this particular case there is no allegation that the goods were not drained out or had been disposed of clandestinely.
5. Shri Arora, Id. Advocate also referred to the Tribunal’s decision in the case of Khalilabad Sugar Mills Pvt. Ltd. v. CCE, Allahabad – 1994 (73) E.L.T. 393 (Tri.). In this case, the Tribunal had taken a view in similar circumstances that the demand for duty on the goods actually destroyed was not sustainable in law. The Tribunal have further observed that as the goods were destroyed without the permission of Central Excise authorities, the imposition of penalty was justified. Para 6 from that decision is extracted below :-
“6. Heard the submissions of both sides and considered them. 1 find that the appellant had sent a letter to the Superintendent, Central Excise on 4-3-1989 intimating inter alia that goods were not marketable as per the certifi- cate given by the Alcohol Technologist nor were they fit for human consump- tion and also that the District Excise Authorities had permitted them to destroy the goods by draining out the molasses. Molasses were actually drained out on 8-3-1989. The Tribunal in the case of U.P. State Sugar Mills Ltd. cited (supra) had held :-
“I have carefully considered the pleas advanced on both sides. I am inclined to agree with the pleas of the appellant’s learned advocate. I agree that the facts in the case of Dhampur Sugar Mills referred to earlier in the Tribunal’s decision relied upon by the Id. SDR are different from the facts of this case and, therefore, the ratio of that decision is not relevant to this case. There is no dispute that the goods were unfit for marketing and consumption and that these had actually been destroyed by draining out. The fact that the Central Excise Authorities did not accord timely permission or even conceding that a proper application was not made to the Central Excise Authorities for getting the permis- sion, it would be an unreasonable interpretation of 2nd proviso to Sub- rule (1) of Rule 49 to demand duty in such cases. Violation committed by the appellant if any, is at best of a procedural nature. 2nd proviso to Sub-rule (1) of Rule 49 reads as follows :-
“Provided further that the proper officer may not demand duty due on any goods claimed by the manufacturer as unfit for con- sumption or for marketing subject to such conditions as may be imposed by the Collector by order in writing.”
The substantive effect of this proviso is that the excisable goods are not liable to duty if they are unfit for consumption or marketing. This fact is not disputed in the instant case. Substantive condition for claiming remission of duty is that the goods are destroyed in a manner so that these are irretrievable as such goods. Destruction of the goods in the instant case is not disputed by the Department. Therefore, the breach of any other procedural condition which may have been prescribed by the Collector may involve imposition of liability to duty for breach of proce- dure. Imposition of liability to duty for breach of procedure is not called for. Accordingly, the demand of duty in the impugned order is set aside.”
On examination of facts in the instant case and comparing the same with those considered by the Tribunal in the order cited (supra), I find that the facts in both the cases are identical. No doubt there was a certificate from the Alcohol Technologist certifying that goods were not marketable. There is no doubt that before destruction an intimation was sent to the Superintendent, Central Ex- cise indicating clearly that the goods were not marketable and that the permis- sion has been accorded by the District Excise Authorities, for draining out the molasses. I also find that the demand for duty on the goods actually destroyed is not sustainable in law. However, as the goods were destroyed without the permission of Central Excise Authorities, I hold that imposition of penalty is justified. As the quantum of penalty is very little, I do not see any reason to interfere with this quantum of penalty.”
In this case, duty of Rs. 15,669/- has been demanded and a penalty of Rs. 2,000/- had been imposed. The Id. Advocate submitted that in the first show cause notice dated 6-2-1979 there was no allegation for imposing any penalty. On the same facts, another show cause notice was issued on 26-6-1982 where it had been stated that as to why action should not be taken against them for illicit removal of the excisable goods. Shri Arora pleaded that as in the first show cause notice, there was no mention of imposition of penalty, the penalty should not have been imposed. However, a corrigendum had been issued on 18-5-1984 wherein the party was to show cause to the Additional Collector of Central Excise, Meerut and it was in this corrigendum that a specific mention had been made for imposition of penalty.
Taking all the relevant considerations into account, we accept the appeal and order accordingly.