1. The appellant, a tobacco warehouse licensee, was held by the lower authorities to have contravened Sub-rules (c) and (d) of rule 151 of the Central Excise Rules, 1944 for having illicitly removed non-duty-paid tobacco from his bonded warehouse and on that ground a penalty of Rs. 2,000/- was imposed on him. Duty on the resultant shortage of 74,716 kgs. of tobacco was demanded from him under rule 160. Further, the quantity of 16,310 kgs. of tobacco which had been seized for contravention of rule 151 was confiscated but an option was given to the appellant to have it redeemed on payment of the fine of Rs. 5,000/-.
2. During the hearing of the appeal before us today, the appellant stated that he had already paid the redemption fine of Rs. 5.000/- and he did not want refund of this money. He was also willing to pay the penalty of Rs. 2,000/-. The only point on which he pressed for his appeal was that the demand for duty on the resultant shortage of 74,716 kgs. of tobacco should be withdrawn. In support of this prayer, he stated that the alleged clandestine removal of tobacco from his warehouse took place in 1975. Duty on unmanufactured tobacco stood withdrawn w.e.f. 1-3-79. Duty on the alleged resultant shortage had not yet been paid. As per the Govt. of India's own instruction, vide Ministry of Finance (Department of Revenue) letter F. No. 81/13/81-CX.III, dated 14-8-81, demands arising out of adjudication cases relating to seizures, shortages etc., were required to be paid according to the rate of duty in force on the date on which duty is baid under rule 9A(5). Since unmanufactured tobacco was fully exempt now, there was no question of the appellant paying any duty on the alleged resultant shortage in his warehouse. The Department's Representative produced a copy of the Central Board of Excise and Customs letter F. No.202/55/84-CX.6 dated, 24-11-84 in which it had been stated as under :- "2. Rule 9A(1) of the Central Excise Rules, 1944 was amended on 11-4-81 and the word 'cleared' was replaced by the word 'removal'.
The word 'cleared' has been opined by the Law Ministry to mean removal after payment of appropriate duty of excise. Therefore, cases of unauthorised and clandestine removal occurring prior to 11-4-1981 would be covered by the provisions contained in Sub-rule (5) of rule 9A. From 11-4-1981, the position is slightly different where it is possible to ascertain the actual date on which goods were clandestinely removed, the rate of duty applicable would be the one that which is provided under Sub-rule (1) ibid. Otherwise resort has to be taken to provisions contained in Sub-rule (5)." 3. The Department's Representative had first stated that since the above plea had been made by the appellant for the first time before the Tribunal, the case may be remanded to the Collector to consider his plea in the first instance. The Bench felt that the plea was a legal one and did not require investigation of any new facts. We, therefore, saw no purpose in remanding the matter to the Collector. The Department's Representative then stated that at least a part of the shortage may be held to be attributable to losses so as to attract the provision of rule 9A(4)(iii) according to which the rate of duty on the goods lost should be as applicable on the date of discovery of the loss. The appellant stated in his defence that though at one time he had taken the plea before the Collector that the shortage was due to natural dryage, the Collector's finding, which the Central Board of Excise & Customs had also confirmed in appeal, was that the shortage was not due to losses but arose because of illicit removal of non-duty-paid unmanufactured tobacco from the appellant's warehouse.
The appellant stated further that in some cases full bundles of tobacco were missing and in other cases the extent of shortage was too high to be attributable to natural dryage. In the scheme of rule 9A, Sub-rule (4)(iii) dealt with cases of natural losses. Since the finding of the lower authorities in his case was one of illicit removals of tobacco, Sub-rule (4)(iii) did not apply and only rule 9A(5) applied according to which no duty was payable now.
4. We have carefully considered the matter. The appellant himself having accepted the penalty, the confiscation and the redemption fine, we reject his appeal on these points. As regards his appeal relating to the demand for duty on the shortage of 74,716 kgs. of unmanufactured tobacco, we agree with the appellant that as per the finding of the Collector and the Board, the case is one of contravention of rule 151(c) and (d), i.e. illicit removal from warehouse. According to view taken by the highest authorities in the Department on the advice of the Ministry of Law, rule 9A(5) is applicable to the cases of this type.
Neither side is able to say as to why rule 9A(5) should not apply to cases of such illicit removals. The view taken by the Board in their letter dated 24-11-84 that rule 9A(5) applied to such cases before amendment of the rule on 11-4-81 is correct.
5. Accordingly, we allow the appeal to the extent that we set aside the demand for duty in respect of 74,716 kgs. of unmanufactured tobacco found short in the appellant's warehouse. In other respects, we confirm the impugned order and reject the appeal.