2015 (9) TMI 1486 - AT - Central Excise

Fire occurrence non intimation - removal of goods from factory - demand of Central Excise duty along with interest and penalties - Held that - It is an admitted fact that the fire took place in the factory of the appellant on 23rd and 24th June, 2012, which is evident from the certificate issued by the Delhi Fire Service and also the claim lodged by the appellant before the Insurance Surveyors. However, due to inadvertence, on occurrence of such incidence, immediate action was not taken by the appellant in intimating the Department regarding such incidence, and the jurisdictional Range Superintendent was belatedly intimated on 2-11-2012. The document enclosed to the said letter proves the fact regarding occurrence of the fire incidence in the factory of the appellant. Since the excisable goods have been destroyed in fire and the same have not been removed from the factory, it is of the view that payment of Central Excise duty cannot be fastened on such destroyed goods. The penalty imposed under Rule 25 of the Central Excise Rules, 2002 is also not justified in view of the fact that goods have not been removed from the factory. However, since the appellant had not informed the Central Excise Authorities regarding the fire incidence took place in the factory, there is violation of the statutory provisions, for which imposition of penalty under Rule 27 of the said Rules is justified. In view of the foregoing, the impugned order so far as confirming the duty demand along with interest and imposition of penalty under Rule 25 of the Rules is concerned, the same is set aside. However, the penalty imposed under Rule 27 of the Rules is confirmed, which the appellant is liable to pay for contravention of the Central Excise Rules.

Summary

Issues:
Appeal against order upholding demand of Central Excise duty, interest, and penalties for destruction of goods without payment of duty.

Analysis:
The appellant, engaged in manufacturing socks, faced proceedings for non-payment of Central Excise duty on 37,799 pairs of branded socks and 63,891 pairs of unbranded socks destroyed in a fire. The Commissioner (Appeals) upheld the duty demand, interest, and penalties, citing lack of intimation to the Department about the destruction. The appellant appealed, claiming lack of knowledge and later informing the authorities with supporting documents. The Respondent reiterated the findings of the impugned order.

The Tribunal acknowledged the fire incident supported by the Delhi Fire Service certificate and insurance claim. While the appellant belatedly informed the Department about the fire, the goods were not removed from the factory, leading to the view that excise duty cannot be imposed on destroyed goods. The penalty under Rule 25 was deemed unjustified as the goods were not removed. However, a penalty under Rule 27 for failure to inform authorities about the fire was upheld.

In conclusion, the Tribunal set aside the duty demand, interest, and penalty under Rule 25 but confirmed the penalty under Rule 27 for contravention of Central Excise Rules. The appellant was directed to pay the upheld penalty.