2009 (4) TMI 816 - Commissioner - Central Excise

Summary

Issues Involved:
1. Remission of duty on destroyed goods.
2. Demand of duty on raw materials, packing materials, and finished goods destroyed in a fire.
3. Reversal of Cenvat credit.
4. Imposition of penalty.

Detailed Analysis:

1. Remission of Duty on Destroyed Goods:
The appellant sought remission of duty on finished goods destroyed in a fire accident on 11-3-2006. The Joint Commissioner rejected the remission claim, stating that the insurance claim included the duty component, which would result in a double benefit if remission was granted. However, the appellant provided documentary evidence indicating that the insurance settlement was exclusive of the duty element. This evidence was overlooked by the Joint Commissioner. The appellate authority found this rejection to be incorrect and noted that the appellant's liability should be NIL since no goods were removed but destroyed in the fire.

2. Demand of Duty on Raw Materials, Packing Materials, and Finished Goods:
The appellant was directed to pay duty on raw materials, packing materials, and finished goods destroyed in the fire, based on values inclusive of the duty element. The Joint Commissioner's conclusion was that since the appellant had not paid duty on these items, they should be liable for the duty. The appellate authority found this to be a flawed approach, as the demand was based on gross values inclusive of duty, which is not permissible. The appellant had provided detailed figures of destroyed goods, but the adjudicating authority failed to deduct the duty elements from the values, leading to an incorrect demand.

3. Reversal of Cenvat Credit:
The appellant reversed Cenvat credit amounting to Rs. 4,71,393/- as directed by the Range Officer. The Joint Commissioner, however, did not accept this reversal due to a lack of detailed entries and dates. The appellate authority noted that the appellant had complied with the directions and filed the necessary returns, and the adjudicating authority should have considered these details. The reversal of Rs. 4,71,393/- was linked to the remission application, which was to be decided by the Commissioner, Central Excise, Pune-II. Therefore, the appellate authority did not make a final decision on this aspect.

4. Imposition of Penalty:
The Joint Commissioner imposed an equal penalty on the appellant, citing various Apex Court decisions related to smuggling and evasion cases. The appellate authority found this imposition to be unjustified, as the fire accident was an unforeseen event beyond the appellant's control, with no intention to evade duty. The penalty was deemed unsustainable, and the appellate authority held that no penalty should be imposed on the appellant.

Conclusion:
The appeal was allowed by setting aside the impugned order passed by the Joint Commissioner, Central Excise, Pune-II. The appellate authority directed the appellant to pay the duty on raw materials, packing materials, and finished goods based on values excluding the duty element. The reversal of Rs. 4,71,393/- was left to be decided by the Commissioner, Central Excise, Pune-II. No penalty was imposed on the appellant due to the accidental nature of the incident and lack of intent to evade duty.