2011 (5) TMI 637 - AT - Central Excise

Remission of duty on finished and semi-finished goods lost in fire - denial of claim on the ground that such fire was avoidable - Held that - The insurance company who has sanctioned the claim of goods lost in fire has inspected the premises of the appellant in the year 1999 who found that after 1998, the appellants have taken necessary steps to prevent fire in future, which were upto the satisfaction of the insurance company as confirmed by their letter dated 03/01/2000. Thereafter, the allegation that the appellants have not taken any steps to prevent fire in future after 1998, is not sustainable. The allegation that fire was avoidable is not sustainable without any corroborative evidence. The report of Tariff Advisory Committee wherein it was stated that no steps were taken by the appellants cannot be given credence as the said report has been made after the occurrence of the fire accident. The other argument that the goods were not stored in bonded store room and found that the major goods lost in fire was very much in bonded store room and only a minimum quantity was outside the bonded store room, it is a fact all the goods were within the factory premises of the appellant. Thus going through the case records and independent reports by all the five authorities, who found that the fire occurred due to unavoidable circumstances, therefore, no reason for denial of claim of remission of duty - in favour of Assessee.

Issues Involved:
1. Denial of remission of duty on goods lost in fire.
2. Demand of duty on goods lost in fire.

Detailed Analysis:

1. Denial of Remission of Duty on Goods Lost in Fire:

The primary issue in these appeals is whether remission of duty on finished and semi-finished goods lost in a fire can be denied on the grounds that the fire was avoidable. The appellants argued that the fire was accidental, as confirmed by multiple independent agencies, including the police, fire brigade, and insurance company. The fire, which occurred on 25.03.2001 due to an electrical short-circuit, led to the destruction of a significant quantity of plastic molded furniture. The appellants had informed all relevant authorities promptly and applied for remission of duty on 08.05.2001.

The Commissioner initially rejected the remission claim, alleging that the appellants were negligent in storing finished goods outside the designated bonded store room (BSR) and near tube lights, which might have caused the fire. However, the appellants contended that they had taken all necessary preventive measures post-1998 fire, as confirmed by the insurance company's inspection in 1999. The insurance company had granted discounts for electrical installations and fire extinguishers, indicating their satisfaction with the preventive measures taken.

The Tribunal found that the Commissioner's decision to deny remission based on the alleged avoidability of the fire was not supported by substantial evidence. The independent reports from the police, fire brigade, Loss Prevention Association of India, and Tariff Advisory Committee all concluded that the fire was accidental and unavoidable. The Tribunal emphasized that the insurance company's approval of the appellants' claim further corroborated the accidental nature of the fire.

2. Demand of Duty on Goods Lost in Fire:

The second issue was the demand for duty on the goods lost in the fire. The Commissioner had confirmed a demand of Rs.60,34,989/- under Section 11A of the Central Excise Act, 1944, along with interest and a penalty of Rs.6,00,000/-. This demand was based on the allegation that the appellants were negligent and careless in preventing the fire.

The appellants argued that the demand was unsustainable as it was based on new grounds not mentioned in the original show cause notice. The show cause notice had alleged that the goods were removed without payment of duty, while the final order confirmed the demand on the grounds of negligence. The Tribunal agreed with the appellants, noting that the independent reports and the insurance company's settlement of the claim supported the conclusion that the fire was accidental and unavoidable.

Conclusion:

After reviewing the case records and hearing both sides, the Tribunal found that the main reason for denying remission of duty was the Commissioner's unsupported allegation that the fire was avoidable. The Tribunal concluded that the fire was indeed accidental and unavoidable, as evidenced by independent reports and the insurance company's actions. Consequently, the Tribunal set aside the order denying remission of duty and the demand for duty on the goods lost in the fire. The appeals were allowed, and the appellants' claim for remission of duty was upheld.

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