1. This is an appeal filed against the order dated 17.8.2001 passed by the Commissioner of Central Excise, Allahabad. The appellant is engaged in the manufacture of sugar and molasses failing under Chapter sub-heading 1701.31/39 and 1703.10 of the Central Excise Tariff Act, 1985. They store molasses in steel tanks While conducting scrutiny of RT 12 returns of molasses for the month of October, 1998, it was noticed that 746.65 quintals of molasses was shown to be lost due to storage in column 6 of RT 12 meant for duty free clearances without giving any reasons for the loss. The appellants vide their letter dated 5.11.1998 addressed to the Superintendent, Central Excise Range, Sardar Nagar, Gorakhpur, informed about shortage of 746.65 quintals of molasses in the tank which was detected by them on physical verification on 23.10.1998. They stated that excess quantity which was being shown, was due to formation of foam/air bubbles in the molasses.
This letter was received by the Superintendent Range II, Gorakhpur on 13.11.1998. Afterwards, the appellants submitted an application dated 7.12.1998 for remission of duty on the said storage loss i.e. after lapse of more than one month.
2. The learned Advocate submitted that a variation involved in the present case is 1.86% and he submitted that as per the CBEC circular No. 261/15/82-CX.8 dated 18.7.83, a variation of 2% is allowed and since the variation in the present case is less than 2% the same may be allowed. In support of his contention, he relied on the decision reported in 7983 (11) ELT 181. He contended that no evidence has been brought on record for clandestine removal and in the absence of any evidence having been brought on record, it is not competent for the Commissioner to demand any duty or impose any penalty. He also submitted that UP State Sugar Corporation is a Public Sector Undertaking. In support of his contention, he relied on the decision in his own case reported in 2000 (117) ELT 183 (Tri.), wherein the Hon'ble Single Member has held that the burden of proof of clandestine removal is on the Department. As regards the shortages, the appellant has submitted that it was due to natural causes and when the clandestine removal is not proved, the imposition of penalty is also not warranted.
In another case namely Ghatampur Sugar Company Ltd. 1986 (85) ELT 69, it has been held that such goods are subject to duty on the basis of actual weight at the time of clearance. Excess stock found on the basis of dip reading not sustainable as molasses are subject to volumetric changes because of number of factors such as temperature and steam.
Formation of foam and formation of bubbles in molasses admitted by the Adjudicating authority. Charge of excess molasses not sustainable. He further relied on the decision in the case of Mewar Sugar Mills Ltd. 1997 (19) RLT 174 wherein the Tribunal has held that during the summer month when the temperature is more, the molasses becomes 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 held to be alleged excess during June 1992 stock verification. The subsequent stock verification was done in December 1992 when the conditions were different affecting the density, volume etc. He also relied on the decision in the case of Bilaspur Kissan Sehkari Chinni Mills Ltd. 1997 (36) ELT 432 (Tri.), wherein a remission to the extent of 50% was allowed due to natural cause or unavoidable reasons. He further submitted that since he has informed the Department within a week about the loss which is clearly evident from the show cause notice and the order in original, the impugned order may be set aside and the appeal may be allowed.
3. Shri V.K. Verma, learned DR has appeared on behalf of the Revenue and he has reiterated the findings of the lower authorities.
4. After hearing the rival submissions and perusal of the records and the case laws cited, I find that the variation of 1.86% claimed by the appellant is very much within the permissible limit allowed by the Board. Therefore, in view of the facts of the case and the legal position as brought out above, I am fully convinced that this is a fit case for setting aside the impugned order. I according set aside the impugned order and allow the appeal filed by the appellants.