2013 (12) TMI 336 - AT - Central Excise

Remission of duty Goods destroyed in fire Held that - The appellants have adopted the same mode of stocking the goods for the last number of years without their being any mis-happening it was unintended and, has occurred on account of excessive heat for which appellant cannot be held responsible - nobody intentionally invites such accidents and they happen on account of various natural causes - Following Union of India v. Hindustan Zinc Ltd. 2008 (10) TMI 63 - HIGH COURT RAJASTHAN the expression natural causes and unavoidable accident are required to be given reasonable and liberal meaning and a more practical approach is required to be taken - the fire was not on account of any lapse on the part of the appellant There was no reasons to deny remission of duty to the appellant in respect of the finally manufactured goods destroyed in fire Confirmation of duty on goods set aside. Denial of credit of duty on packing material Held that - Packing material was lying in the godown of the applicant and was not even issued for further use in the factory - credit in respect of raw material/packing materials (Bleaching Powder) which were not put to use or were not even issued for use as is required to be reversed - the accident occurred on account of unavoidable cause, imposition of penalty upon appellant is not justifiable and set aside Decided in favour of Assessee.

Summary

Issues:
Remission of duty for goods destroyed in fire, denial of remission application, confirmation of duty and Cenvat credit, negligence leading to fire, natural causes of destruction, denial of credit for packing material, imposition of penalty.

Analysis:

1. Remission of Duty for Destroyed Goods:
The case involved appeals regarding the remission of duty for goods destroyed in a fire at the appellant's factory. The Commissioner had denied the remission application, leading to the confirmation of duty and Cenvat credit. The Tribunal noted the circumstances of the fire, including loss of goods and a human life. The appellant's precautions and the cause of the fire were scrutinized.

2. Negligence and Natural Causes:
The Commissioner observed that negligence on the appellant's part led to the fire, citing inadequate precautions. However, the Tribunal disagreed, stating that the excessive heat was a natural cause and not due to negligence. They compared it to a car accident, emphasizing that accidents can happen despite precautions. Citing precedent cases, the Tribunal highlighted that natural causes should be reasonably interpreted, leading to the conclusion that the fire was not due to the appellant's fault.

3. Denial of Credit for Packing Material:
While remitting duty for destroyed goods, the Tribunal confirmed the denial of credit for packing material that was not utilized or issued for further use. This decision aligned with established law requiring the reversal of credit for unused raw materials. The advocate did not contest this point, resulting in the confirmation of the demand for the packing material credit.

4. Imposition of Penalty:
Due to the Tribunal's finding that the fire was an unavoidable accident, they deemed the imposition of a penalty unjustifiable and set it aside. The judgment was pronounced on 8-4-2013, disposing of both appeals accordingly. The remission of duty for destroyed goods was granted, while the denial of credit for packing material was upheld, and the penalty was revoked based on the determination of an unavoidable cause for the fire.