2012 (6) TMI 255 - AT - Customs

Shortage of goods found during stock verification - demand imposed - assessee contended that shortage of goods occurred due to fire accident - applicability of Rule 12 of SEZ Rules, 2003 and regulation 28 of SEZ (Customs Procedure) Regulations, 2003 - Held that - Demand of customs duty foregone does not arise as the goods were in the factory premises when the fire accident took place. It is undisputed that departmental officers have been informed of such accident. Also Tribunal held in case of Satguru Polyfab Pvt. Ltd (2011 (2) TMI 403 (Tri))that when there is an accidental fire resulting in destruction of goods, it cannot be said that it amounts to use of goods for unauthorized operations. Similarly the second term namely failure to account for also cannot be applied since the shortage has been accounted for by fire accident and no evidence has been brought out by Revenue to show that goods have been procured or released elsewhere. Therefore, impugned order is set-aside - Decided in favor of assessee.

Summary

Issues:
Interpretation of Rule 8 of SEZ Rules, 2003 in the context of duty liability for destroyed goods in a fire accident in a unit located in a Special Economic Zone (SEZ).

Analysis:
The appeal challenged an order regarding shortages of imported goods in a unit located in a Special Economic Zone (SEZ) due to a fire accident. The Customs officers found shortages during stock verification and demanded the customs duty foregone, leading to a show cause notice. The appellant argued that the goods were destroyed in a fire accident and sought remission of the duty. The adjudicating authority rejected the contentions, holding the duty liability on the appellant, as the goods were not used for authorized operations. The appellant contended no violation of Rule 8, citing the Tribunal's decision in a similar case.

The Tribunal considered the submissions and records, finding shortages and the fire accident undisputed. The adjudicating authority relied on SEZ Rules and regulations to hold the appellant liable for customs duty foregone. However, the Tribunal disagreed with the reasoning, emphasizing that the fire accident led to goods' destruction before intended use, thus not constituting a breach of Rule 8. Referring to a previous case, the Tribunal highlighted that Rule 8 applies when goods are used for unauthorized operations or not accounted for, which was not the case here. The Tribunal concluded that the duty demand was unjustified, setting aside the impugned order and allowing the appeal.