1. At the outset of the proceedings, it was brought to the notice of the learned Senior Departmental Representative that there is a defect in the appeal to the effect that the memorandum of appeal has not been signed properly. There are no signatures at the place of the signature of appellant after column No. 10 as well as in the verification. The letter of authorisation attached along with the appeal is also not signed by the Collector of Central Excise, Patna though there is attestation on the left side of the said letter of authorisation under Sub-section (2) of Section 35-B of the Central Excises and Salt Act, 1944. Similarly, on the memorandum of appeal, there are signatures on the left side of the appeal at the place "signatures of authorised representative if any".
2. In reply the learned Sr. D.R. has pleaded that the Collector includes additional Collector and the signatures by the Additional Collector are sufficient enough to comply with the provisions of Sub-section (2) of Section 35-B of the Central Excises and Salt Act, 1944. He has further pleaded that the Additional Collector has signed the same after taking necessary permission from the Collector. His signatures on the left side of the memorandum of appeal viz. Form EA 3 is a bona fide mistake and the same may be condoned.
3. Shri C.S. Sinha, the learned advocate on behalf of the respondent has pleaded that this Court may take its view as it thinks fit.
4. Under Sub-section (2) of Section 35-B of the Central Excises and Salt Act, 1944, the Collector of Central Excise has to direct a Central Excise Officer authorised by him to file an appeal. The relevant Sub-section (2) of Section 35-B of the Central Excises and Salt Act is reproduced as under :- "(2) The Collector of Central Excise may, if he is of opinion that an order passed by the Appellate Collector of Central Excise under Section 35, as it stood immediately before the appointed day or the Collector (Appeals) under Section 35A, is not legal or proper, direct a Central Excise Officer authorised by him in this behalf (hereafter in this Chapter referred to as the authorised officer) to appeal on his behalf to the Appellate Tribunal against such order." Rule 9 of the Customs Excise and Gold (Control) Appellate Tribunal Procedure Rules, 1982 prescribes the documents which are to accompany with the memorandum of appeal. Rule 9 of the said Rules is reproduced as under : "Rule 9. What to accompany memorandum of appeal.-(1) Every memorandum of appeal shall be filed in quadruplicate and shall be accompanied by four copies (at least one of which shall be a certified copy) of the order appealed against and where such order is an order passed in appeal or revision, four copies (at least one of which shall be a certified copy) also of the order of the adjudicating authority.
(2) In an appeal filed under the direction of the Collector or the Administrator, the memorandum of appeal shall also be accompanied by an attested copy of the order containing such direction." A simple reading of the Rule 9 shows that where an appeal has been filed under the direction of the Collector or the Administrator the memorandum of appeal shall be accompanied by an attested copy of the order containing such direction. In the instant case, the memorandum of appeal is accompanied by a letter of authorisation duly attested by the Additional Collector. Accordingly, I hold that the appeal has been filed correctly in accordance with the provisions of Section 35B of the Central Excises and Salt Act, 1944 read with Rule 9 of the Customs, Excise and Gold (Control) Appellate Tribunal Procedure Rules, 1982.
Regarding the signing of the memorandum of appeal on the other side, I hold that it is a bona fide mistake on the part of the appellant. The appellant has signed the memorandum of appeal viz. Form No. EA 3 on the left side where the authorised representative has to sign the memorandum of appeal. The same has been signed by the Additional Collector in his instant case and there is an authorisation by the Collector in his favour to file an appeal. The bona fide of the appellant should not be doubted. Accordingly, I hold that the appeal has been properly signed.
5. Briefly the facts of the case are that the respondent M/s. Bihar State Sugar Corporation Ltd., Unit Sakri as per allegations of the revenue had contravened the provisions of Rules 9(1) and 149 of the Central Excise Rules, 1944 inasmuch as they removed 10,945.68 qtls. of molasses without payment of duty in an unauthorised manner. The jurisdictional Inspector of Central Excise had raised a demand vide DD2 No. 72881 dated 24th May, 1982 for Rs 34478.89 under Rule 9(2) of the Central Excise Rules, 1944 coupled with a show cause notice vide C. No.Molasses/28/82/174 dated 24th May, 1982 desiring the assessee to show cause to the Assistant Collector, Central Excise, Laheriasarai why a penalty should not be imposed upon them under Rules 9(2) and 173-Q of Central Excise Rules, 1944. The respondent in reply to the said show cause notice submitted that the molasses in question were stored in open kutcha pits. There was shortage of space and some molasses of 78-79 also had to be mixed with the old stock in the open kutcha pit.
There was prohibition in Bihar that the distilleries did not lift the molasses in spite of the order of the Molasses Commissioner. This resulted in deterioration of the molasses stored in the open kutcha pit. The respondent had approached the Molasses Controller of Bihar and after undergoing all chemical tests and after being satisfied that the molasses was really deteriorated, the Molasses Commissioner approved its destruction vide his letter dated 31st December, 1981. The respondent had also contended that the Excise Authorities had visited factory on 26th April, 1982 and the molasses were destructed in the presence of the Excise Authority in accordance with the procedure laid down by the Molasses Commissioner. The molasses were destroyed on 26th April, 1982 under the supervision of State Excise Department. This fact has also been shown in the R.T. 12 return which was duly assessed by the proper officer of the Central Excise. The respondent vide their letter dated 18th April, 1982 had informed the Collector of Central Excise, Patna with copies to the Assistant Collector, Central Excise, Laheriasarai and the Sector Officer of Central Excise posted in the Sugar Mill, the full facts with copies of letters regarding the permission accorded for destruction of molasses by the Commissioner of Bihar State Excise and Chemical Test Report and sought the approval for destruction of the molasses. After giving above letter dated 18th April, 1982 regarding the above facts, the said molasses was destroyed on 26th April, 1982 under the supervision of the Supdt. of Bihar State Excise. The learned Assistant Collector of Central Excise, Laheriasarai did not accept the contention of the respondent and had observed that under Rule 47, molasses were allowed to be stored without payment of duty and in self-removal procedure, such storage place shall be deemed to be a licensed warehouse under Rule 140. Any destruction of such warehoused non-duty paid goods should follow the provisions of Rule 149 of the Central Excise Rules, 1944. The respondent had removed the goods in contravention of Rules 9 and 49 and had destroyed the same without informing or following the procedure set out under the Central Excise Rules, 1944. The learned Assistant Collector had confirmed the demand for Rs. 34,478.89 and has also imposed a penalty of Rs. 2,000 under Rule 173-Q. Being aggrieved from the aforesaid order, the respondent had gone in appeal before the Collector of Central Excise, Appeals. The learned Collector (Appeals) had accepted the respondent's appeal and being aggrieved from the aforesaid order, the revenue has come in appeal before this Court.
6. Shri A.K. Sarkar, the learned Senior Departmental Representative has appeared on behalf of the appellant. He has pleaded that under Rule 47, it is obligatory for the assessee to seek permission from the authorities for the destruction of goods. Rule 47 deals as to how the goods may be stored without payment of duty and in the self-removal procedure, such storage should be in a licensed warehouse under Rule 140. The destruction of the goods has to be in accordance with the provisions of Rule 49 of the Central Excise Rules, 1944.
7. In reply Shri C.S. Sinha, the learned Advocate has pleaded that the revenue is trying to make a fresh case. He has referred to the judgment of J.K. Synthetics Ltd. v. Union of India and Ors. reported in 1981 ECR 333D (Delhi) wherein it was held that whatever may be the position of a court of law or of an Appellate Tribunal it is not open to the Income-tax Authorities to change their view capriciously. He has pleaded that there is no obligation upon the assessee under the provisions of Rule 47 in respect of destruction of goods which is unfit for human consumption. He has also pleaded that there is no contravention of Rule 49 of the Central Excise Rules. He has further pleaded that transfer into kutcha pits is also no contravention at all.
He has pleaded that the respondent was following the self-removal procedure and the molasses was under the State Excise control. He has pleaded that the appeal filed by the revenue should be dismissed.
8. After hearing both the sides and going through the facts and circumstances of the case, I hold that the appellant has not followed the procedure as prescribed under Rule 149 of the Central Excise Rules, 1944. The relevant Rule 149 is reproduced as under : "Rule 149. Destruction of unusable material, waste and other refuse.- Every owner of the goods stored in a warehouse who wishes to claim immunity from duty in respect of any goods unfit for consumption or manufacture shall destroy them in the presence of an officer or shall show to the satisfaction of the officer that they are being applied to some purpose which render them eligible for remission of duty." At the relevant time of destruction of the goods, Rule 149 was in operation. The provisions of Rule 149 are mandatory. In the instant case, the respondent has not complied with the requirements of Rule 149. The excise goods were destroyed in the presence of State Excise Superintendent. The respondent's reply to show cause notice vide Ref. No. 1392 dated 27th May, 1982 is reproduced as under: Ref: Your letter No. MO 1/20/82/152 dt. 26-4-82 and notice to show cause Molasses/20/82 dated 24-5-82.
With reference to your above referred letter and show cause to inform you that the deteriorated molasses in question were old stock since 1974-75 stored in open kutcha pits. For want of storage space, some molasses of 78-79 also had to be mixed with old stock in the open kutcha pit. You are aware that during prohibition period in Bihar, the distilleries did not lift the molasses in spite of the order of the Molasses Commissioner. This resulted in deterioration of the molasses stored in the open kutcha pits. For this we made a large no. of correspondence with Molasses Controller of Bihar and after undergoing all chemical tests and after being satisfied that the molasses was really deteriorated, the Molasses Commissioner approved its destruction vide his letter No. 938 dated 31-12-81.
While giving instruction for destruction, the Molasses Controller-cum-Excise Commissioner, Bihar laid down procedure for destruction in the presence of the Excise Superintendent, Darbhanga.
When all procedures were about to be gone through, the destruction of deteriorated molasses, the Excise Dept. during his visit on 26-4-82 had got the deteriorated molasses destructed in his presence in accordance with the procedure laid down by the Molasses Commissioner.
From the above, it will appear that the destruction of the deteriorated molasses was done by the rightful authority i.e. the Excise Supdt. Under the orders from the Molasses Controller. The correspondence for this destruction was going on since last several years as it will appear from the enclosures of our letter No. 1263 dated 18-4-82 and if there was anything. wrong in it, you...cessors might have raised objection. It is ...objection is dated 26-4-82, the date on which the Excise Supdt., Dar has got the molasses destructed. In the above circumstances, it is requested that our above said explanation may be accepted and the demand for taxes on the deteriorated molasses already destructed by the Excise Supdt., Dar on the orders of Molasses Commissioner, Bihar may kindly be withdrawn. Attached copy of the certificate of destruction issued by the Excise Supdt. Dar is enclosed for your perusal.
In the respondent's letter dt. 20th December, 1982 addressed to the Asstt. Collector of Central Excise, the respondent himself has admitted that the destruction was done in the absence of Central Excise authorities. Relevant extract of the said letter is reproduced as under : In compliance to your letter No. V-I/15/6DD/82/7430 dated 6-12-82 I appeared before you on 14-12-82 at 2.30 P.M. and personally explained regarding destruction of deteriorated molasses. After hearing, you were pleased to direct the undersigned to submit all the relevant papers concerning the destruction of molasses duly attested by Inspector, CE, Sakri. Accordingly we are enclosing herewith all the relevant papers duly attested for your necessary action. This has reference to DD2 No. 72881 dt. 24-5-82. Destruction of molasses was being done by the State Excise Supdt., Laheriasarai on the basis of order issued by the Excise Commissioner and Controller of Molasses, Bihar, Patna. We have no direction from the Central Excise Deptt. that we were to solicit the permission of the C. EX. authorities as well. Destruction was done in good faith by the competent authority. We had no otherwise interest. The molasses was totally of no use for distillery and other purposes, because the same was of 1974-75 and 1978-79 and it was stored in kutcha pit which had become practically destroyed due to rain water.
Under the above circumstances, we request you to withdraw the demand raised by DD2 No. 72881 dated 24-5-82 and we undertake that in future such type of irregularity will not occur.
A simple perusal of the letter dated 20th December, 1982 shows that the destruction of the goods was done in the absence of the Central Excise Authorities. Rather the destruction of the goods was done in the presence of State Excise authorities just after one week after getting necessary sanction of destruction from the Molasses Commissioner. The argument of the learned counsel for the respondent that the department has made a new case at the appellate stage is not tenable. The judgment cited by the learned advocate doss not help him. The revenue has not raised any fresh plea. The revenue has taken the plea on the facts and the papers already on record. The Hon'ble Andhra Pradesh High Court in the case of C.I.T. v. Gangappa Cables Ltd. reported in 116 ITR 778/1979, Taxation Law Report 37 (not cited by the parties) had held that where there is sufficient evidence on record, new plea can be taken before the Tribunal. 1 would also like to observe that this Court had passed an order in Appeal No. ED (CAL)/480/83 in the case of Collector of Central Excise, Patna v. Bihar State Sugar Corporation Ltd. vide order dated 3rd January, 1984. The present respondent was the respondent in the said appeal. This judgment has not been brought to my notice by any of the party. In the said order the facts were similar but the difference was that the destruction of the goods was done in the presence of the Central Excise Authorities and the Central Excise Authorities had duly issued a certificate to the effect that the molasses were destructed in their presence. There were periodical inspections by the Central Excise Authorities in that case. The destruction was done in the year 1980, but the respondent had sent the intimation in December, 1978 to the Central Excise Authorities and accordingly this Court had accepted the version of the respondent and the appeal filed by the revenue was dismissed. But in the instant case, the facts are different. There is no intimation to the Central Excise authorities. The goods were destroyed straightaway after getting necessary permission of the Molasses Commissioner. Accordingly, I am not adopting my earlier view which I have followed in Appeal No.ED(CAL)-480/ 83 and order dated 3rd January, 1984. Since the respondent has not complied with the formalities as provided under Rule 149 of the Central Excise Rules, 1944 read with Rule 47 of the said Act, I hold that the order passed by the Collector (Appeals) is not correct in law.
Accordingly, I restore the order passed by the Assistant Collector as to the creation of demand of Rs. 34,478.79. In view of the peculiar circumstances of the case, I do not feel that it is a fit case where penalty of Rs. 2,000 under Rule 173-Q of the Central Excise Rules, 1944 should be levied. Accordingly, the order of the Collector (Appeals) is confirmed to the extent of quashing of the penalty of Rs. 2,000 (Rupees two thousand only). For the statistical purposes, the appeal is partly allowed.
9. The respondent has also filed a Cross-objection. No notice for the hearing of the cross-objection was issued and during the course of arguments, I had asked both the parties if they had got objection as to the hearing of the cross-objection, both the parties have pleaded that they have no objection if the cross-objection is disposed of today. No new issue has been raised in the cross-objection. The cross-objection is in the support of the order passed by the Collector (Appeals). The cross-objection is dismissed.