2011 (4) TMI 1134 - HC - Central Excise

100% EOU - appellant received 737 drums/barrels of finished goods from their Berhampur warehouse. Out of these, 566 drums of finished goods became unfit for human consumption - petitioner submit that the appellant intimated about spoiled goods in 737 drums well in advance and, as the department delayed inspection, the appellant had to destroy the same along with 198 more drums received subsequently because of the objection of the villagers regarding sanitation problems Held that - Commissioner can arrive at his satisfaction only when necessary evidence is produced by the assessee. Admittedly the analytical report covers 566 drums and there was no such analytical report for the other drums including 198 drums. It appears the adjudicating as well as appellate Commissioners let off the appellant in respect of 737 drums for which intimation was given. In so far as 198 drums were concerned, the appellate Commissioner as well as CESTAT came to the correct conclusion after appreciating the factual background, appeal is misconceived and is accordingly dismissed

Summary

Issues:
1. Appeal under Section 35G of the Central Excise Act, 1944 against the final order of the Customs, Excise and Service Tax Appellate Tribunal.
2. Duty recovery proceedings initiated by the Commissioner for spoiled goods and subsequent appeals.
3. Interpretation of Rule 21 of the Central Excise Rules, 2002 regarding remission of duty for destroyed goods.

Analysis:
1. The appellant, a 100% EOU manufacturing fruit pulp, shifted their factory location and faced issues with spoiled goods. They sought permission to destroy 737 drums of finished goods, of which 566 became unfit for consumption. Despite initial delay by the department, the appellant proceeded to destroy all drums, including 198 received subsequently, without explicit permission. The Commissioner initiated proceedings for duty recovery, leading to appeals and subsequent dismissal by the CESTAT.

2. The Counsel for the appellant argued that timely intimation was given to the department about the spoiled goods, justifying the destruction without explicit permission. The Counsel relied on Rule 21 of the Central Excise Rules, 2002, which allows remission of duty for goods claimed as unfit for consumption. The appellant's claim was based on the premise that the destroyed goods were unfit for human consumption, supported by an analytical report for 566 drums but lacking evidence for the remaining 198 drums.

3. The Court emphasized the strict interpretation of Rule 21, stating that the Commissioner can remit duty only when goods are proven to be unfit for consumption. The appellant failed to provide necessary evidence for all 935 drums destroyed, with analytical reports only covering 566 drums. The appellate Commissioner and CESTAT correctly differentiated between the drums for which intimation was given and those lacking proper documentation. The judgment concluded that the appeal did not involve any substantial question of law, dismissing it as misconceived.

In summary, the judgment addressed the appellant's appeal against duty recovery for destroyed goods, highlighting the importance of providing evidence of goods' unfitness for consumption to claim remission of duty under Rule 21. The Court upheld the decisions of the appellate Commissioner and CESTAT, ultimately dismissing the appeal for lack of substantial legal questions.