2010 (2) TMI 1021 - AT - Central Excise

Summary

Issues involved:
1. Demand of excise duty on lost input materials.
2. Demand of excise duty on finished products/work-in-progress lost in floods.
3. Time-barred nature of the demand.
4. Power to grant remission of duty.
5. Obligation to account for goods in an approved place of storage.
6. Applicability of limitation period under Rule 223A of Central Excise Rules, 1944.

Analysis:

Demand of excise duty on lost input materials:
The case involved a demand of excise duty on input materials lost in floods, where the original authority confirmed a demand under Rule 57-I for input credit but set aside the demand on finished goods. The Department appealed against the dropping of the demand, leading to the appellants filing an appeal before the Tribunal.

Demand of excise duty on finished products/work-in-progress lost in floods:
The lower appellate authority allowed the Department's appeal, citing that the original authority exceeded prescribed powers for remission of duty. The appellants contested this, arguing that the demand was time-barred as they had filed returns indicating the loss much earlier.

Time-barred nature of the demand:
The appellants claimed that the demand issued in 2000 was time-barred as they had reported the loss in earlier returns. However, the Department argued that the power to grant remission for duty rested with the Commissioner, and in the absence of such remission, the original authority had no power to drop the demand.

Power to grant remission of duty:
The Department contended that the appellants were required to apply for remission of duty under the relevant rules, which they had failed to do. The lower appellate authority's decision to reverse the original authority's order was supported on the grounds that the demand was payable unless remission was granted by the Commissioner.

Obligation to account for goods in an approved place of storage:
The Tribunal highlighted the obligation of an assessee to account for goods in an approved storage place as a continuing obligation. It was emphasized that this obligation did not extinguish with time, especially as no specific period was prescribed under Rule 223A of the Central Excise Rules, 1944.

Applicability of limitation period under Rule 223A:
Citing a decision by the Larger Bench in a similar case, it was clarified that the obligation to account for goods did not have a prescribed limitation period under Rule 223A. The argument that the demand was time-barred was deemed untenable in light of this clarification.

In conclusion, the Tribunal upheld the lower appellate authority's order, dismissing the appeal. However, the appellants were granted the liberty to file a claim of remission before the jurisdictional Commissioner for further consideration, ensuring a reasonable opportunity for a hearing.