2006 (12) TMI 41 - AT - Central Excise

Demand- Department demanded for Rs. 54000/- under Rule 9 (23) of the CER, 1944, due to non-accountal of 1500 kgs of primary foam blocks- Matter is remanded to adjudicating authority for a fresh decision.

Summary

Issues involved:
Challenge to order confirming demand under Rule 9(2) of Central Excise Rules, 1944 for non-accountal of primary foam blocks destroyed in fire accident. Application for remission of duty rejected by Commissioner. Interpretation of Rule 147 and Rule 49 in relation to remission of duty on lost or destroyed goods. Discrepancy in communication of remission decision. Consideration of Tribunal decisions on remission of duty in similar cases.

Analysis:
The appellant contested the order confirming a demand of Rs. 54,000 under Rule 9(2) of the Central Excise Rules, 1944, for 1500 Kgs. of primary foam blocks destroyed in a fire accident. The appellant argued that the fire was caused by a chemical reaction in the unfinished product, and since the goods were not cleared, duty should not be levied. The adjudicating authority upheld the demand based on the rejection of remission communicated by the Deputy Commissioner, making the Modvat credit demand redundant.

In the appeal before the Commissioner, it was argued that the rejection of the remission application was unjustified, as the fire was due to natural causes and all precautions were taken. The Commissioner held that only they had the authority to remit duty on goods destroyed by unavoidable accidents, and since the remission was rejected, the demand had to be confirmed. The appellant's plea based on Rule 49 entitlement was rejected, emphasizing the Commissioner's power under Rule 147 for remission.

The appellant further contended that the goods were destroyed before removal, entitling them to Rule 49 benefits, not Rule 147. Reference was made to Tribunal decisions emphasizing the need for judicial exercise of discretion in remitting duty for lost or destroyed goods due to unavoidable accidents. The authorized representative for the department supported the lower authorities' findings, highlighting discrepancies in the appellant's statements regarding the communication of the remission decision.

The Tribunal noted the absence of the order rejecting remission and the failure to discuss its nature by the lower authorities. It emphasized the distinct fields of Rule 147 and Rule 49, requiring a proper examination of the power exercised in rejecting the remission application. Consequently, the matter was remanded to the adjudicating authority for a fresh decision in accordance with the law, setting aside the Commissioner's order and allowing the appeal by way of remand.