2016 (1) TMI 1186 - AT - Central Excise

Remission of duty - Lost in fire - Demand - Rule 49 of CER, 1944 read with Rule 21 of CER, 2002 - Held that - The conditions which has been prescribed for remission of duty, are natural causes, or unavoidable accident and the product becoming unfit for human consumption or marketing. The ld. Commissioner have also erred in holding that electric short circuit in his view cannot be said to be a natural cause. Under the facts that all the records of the appellant had been destroyed in fire, the ld. Commissioner and have erred in observing that in the intimations given to the Revenue recording the fact of fire and loss given on 24-05-1999 and 07-02-2000 without any supporting or statutory records to the satisfaction of the Revenue Officer - Appeal allowed - decided in favor of the assessee.

Issues Involved:
1. Remission of duty on goods destroyed in a fire accident.
2. Calculation and verification of the quantity of goods destroyed.
3. Compliance with procedural requirements for claiming remission.
4. Interpretation of "unavoidable accident" under Central Excise Rules.

Detailed Analysis:

1. Remission of Duty on Goods Destroyed in a Fire Accident:
The appellant, a shoe manufacturer, appealed against the order of the Commissioner of Central Excise, Kanpur, which rejected their claim for remission of duty on footwear lost in a fire accident on 22-05-1999. The Commissioner had raised a demand of Rs. 19,67,342/-.

2. Calculation and Verification of the Quantity of Goods Destroyed:
The appellants claimed that approximately 18,000 pairs of footwear and 6,000 pairs of uppers were destroyed, valued at Rs. 86,45,520/-, involving a duty of Rs. 13,83,283/-. The department, however, calculated the destroyed quantity as 25,543 pairs based on the previous year's average production, which the appellants contested as incorrect and hypothetical.

3. Compliance with Procedural Requirements for Claiming Remission:
The appellants provided detailed information and reports from various authorities, including the Fire Brigade, Police, and their internal inquiry, to substantiate the fire accident and the loss incurred. Despite the loss of all records in the fire, they furnished RT-12 returns and other necessary details to the Central Excise authorities. The Commissioner, however, rejected the remission claim on grounds of insufficient statutory records and procedural lapses.

4. Interpretation of "Unavoidable Accident" under Central Excise Rules:
The central issue was whether the fire caused by an electric short circuit could be classified as an "unavoidable accident" under Rule 49 of the Central Excise Rules, 1944, read with Rule 21 of the Central Excise Rules, 2002. The Commissioner held that an electric short circuit did not qualify as an unavoidable accident, a stance that the Tribunal found erroneous.

Tribunal's Findings:

1. Remission of Duty: The Tribunal found that the Commissioner erred in rejecting the remission claim. The fire accident due to an electric short circuit qualifies as an "unavoidable accident" under the relevant rules. The Tribunal emphasized that the fire authority and police reports confirmed the cause as an electric short circuit, and the insurance company had also accepted and settled the claim based on this reason.

2. Calculation and Verification: The Tribunal criticized the Commissioner for relying on assumptions and previous year's data to calculate the destroyed goods. Given that the appellants' records were destroyed in the fire, the Tribunal found the demand of duty based on hypothetical calculations unjustified.

3. Procedural Compliance: The Tribunal noted that the appellants had promptly informed the relevant authorities about the fire and provided all possible documentation and reports. The insistence on statutory records, which were destroyed in the fire, was deemed unreasonable.

4. Interpretation of "Unavoidable Accident": Citing the Allahabad High Court's ruling in Commissioner of Central Excise Vs M. Kumar Udhyog (P) Ltd., the Tribunal held that a fire due to an electric short circuit is indeed an unavoidable accident. The High Court had interpreted "unavoidable accident" as an event beyond the control of the assessee, occurring despite reasonable care.

Conclusion:
The Tribunal allowed the appeal, set aside the impugned order, and granted consequential relief to the appellant. The decision underscored that the fire accident due to an electric short circuit qualifies as an unavoidable accident, warranting remission of duty under the Central Excise Rules. The Tribunal emphasized the need for a reasonable interpretation of procedural requirements, especially when statutory records are destroyed in such accidents.

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