2014 (6) TMI 237 - AT - Central Excise

Duty demand - Remission of duty - finished goods as well as raw materials destroyed in fire - demand on inputs imported / procured free of duty - interest - 100% EoU manufacturing bulk drugs and pharmaceutical products - Held that - in terms of the bond executed, the appellant is liable to discharge Customs duty liability on the imported raw materials destroyed as such in the fire accident or the imported raw materials contained in the finished products destroyed as such. Domestically procured goods were destroyed when they were being stored in the manufacturer s premises and therefore, the appellant cannot seek remission under Rule 21 of the Central Excise Rules, 2002 as the condition of permission stipulates the appellant would be liable to pay excise duty if the goods are not used for the intended purpose. Notification 1/95, under which the goods have been procured, stipulates that the goods have to be used in the manufacture of specific products which are required to be exported. Inasmuch as, in the present case, this condition is not satisfied, the appellant is liable to discharge duty on the raw materials destroyed during storage in the manufacturer s premises - once the goods are procured duty-free under exemption Notifications, the provisions of Section 23 of the Customs Act, will have no application - Following decision of Antarctica Ltd. 2009 (2) TMI 477 - CALCUTTA HIGH COURT and S.K. Pattanaik s case 1999 (12) TMI 60 - SUPREME COURT OF INDIA - Decided against assessee.

Issues Involved:
1. Remission of customs duty on imported raw materials destroyed by fire.
2. Remission of excise duty on domestically procured raw materials destroyed by fire.
3. Compliance with warehousing and manufacturing-in-bond conditions.

Issue-wise Detailed Analysis:

1. Remission of Customs Duty on Imported Raw Materials Destroyed by Fire:
The appellant, a 100% Export Oriented Unit (EOU), sought remission of customs duty under Section 23 of the Customs Act, 1962, for imported raw materials destroyed in a fire. The appellant argued that the destruction of goods before clearance for home consumption should qualify for remission. The appellant also cited Rule 21 of the Central Excise Rules, 2002, which allows for remission if goods are destroyed by natural causes before removal.

However, the adjudicating authority confirmed the duty demand, stating that the appellant failed to insure the goods for the customs duty portion, breaching the warehousing license conditions under Sections 58 and 65 of the Customs Act. The tribunal held that specific provisions under Sections 58 and 65, which require compliance with warehousing conditions, prevail over the general remission provision under Section 23. Since the appellant did not insure the goods for customs duty, the demand for customs duty on the destroyed imported raw materials was upheld.

2. Remission of Excise Duty on Domestically Procured Raw Materials Destroyed by Fire:
The appellant also sought remission of excise duty on domestically procured raw materials destroyed in the fire, arguing that the provisions for remission under the Central Excise Rules should apply. The adjudicating authority denied remission, citing Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. This rule deems goods not used for the intended purpose if they are lost or destroyed during transport or storage in the manufacturer's premises.

The tribunal supported this view, stating that since the domestically procured goods were destroyed during storage, they were not used for the intended purpose of manufacturing goods for export. Therefore, the appellant was liable to pay excise duty on these raw materials.

3. Compliance with Warehousing and Manufacturing-in-Bond Conditions:
The tribunal emphasized the importance of complying with warehousing and manufacturing-in-bond conditions. The appellant had executed a bond requiring them to insure the goods against various risks, including fire, for a value equal to the customs duty. The failure to insure the goods for customs duty constituted a breach of the warehousing license and bond conditions. The tribunal reiterated that specific provisions regarding warehousing and manufacturing-in-bond take precedence over general remission provisions.

Conclusion:
The tribunal dismissed the appeal, upholding the duty demands on both imported and domestically procured raw materials destroyed in the fire. The decision emphasized the necessity of complying with specific warehousing and manufacturing-in-bond conditions, and the non-applicability of general remission provisions in cases of non-compliance.

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