2014 (11) TMI 579 - AT - Central Excise

Remission of duty - Goods destroyed due to unavoidable accident - Whether Remission of duty is allowable when goods, cleared from factory without payment of duty for export under Bond, are destroyed due to unavoidable accident before the said goods could be exported - Held that - Sale would be completed at load port only as per definition of Place of Removal given u/s 4(3)(c)(iii) of the Central Excise Act 1944. Under these circumstances, ownership of the goods and duty liability is also extended upto the load port and if, the goods are not exported, concerned manufacturer will be required to discharge the duty liability. Therefore, removal also gets extended upto the port of shipment from where the sale would be completed and when the goods were to be exported. Hence, if the goods cleared for export under Bond are destroyed before the export, ownership of the said goods and also duty liability, if any, would be always to the account of appellant assessee and that the said goods could be considered having been destroyed before removal and the benefit of Remission of duty is allowable in such an exceptional situation in terms of Rule 21 of Central Excise Rules 2002. Clause (iii) in Section 4 (3) (C) for Place of removal was inserted w.e.f. 14.05.2003 vide section 136 of the Finance Act 2003. Goods cleared for export under Bond which were destroyed before the same could be exported, can be treated as having been destroyed before removal only. This would be the fair interpretation of the Rule 21 of the Central Excise rule 2002. Thus, primary condition of eligibility of Remission of duty on the destroyed goods is fulfilled as required u/r 21 of Excise Rules 2002. Appellant is eligible for the Remission of duty in respect of goods for export under Bond which were destroyed before the same could be exported. in cases where goods removed from factory for export under Bond are destroyed before export, due to unavoidable accident, then in such situation the goods destroyed are to be treated as having been destroyed before removal in terms of Rule 21 of Central Excise Rules 2002. - Decided in favour of assessee.

Issues Involved:
1. Whether 'Remission of duty' is allowable when goods, cleared from factory without payment of duty for export under Bond, are destroyed due to unavoidable accident before the said goods could be exported.

Issue-wise Detailed Analysis:

1. Reference to Larger Bench:
A Single Member Bench of CESTAT at Ahmedabad referred the issue to the Hon'ble President, CESTAT for consideration by a Larger Bench due to conflicting views within the Tribunal. The matter was heard on 03/04.09.2014.

2. Facts of the Case:
The appellant, a manufacturer of excisable goods, cleared goods under ARE-1 for export under bond without payment of duty. The goods were damaged by fire at the port before they could be exported. The appellant sought remission of duty, which was initially rejected on the grounds that the goods had been removed from the factory premises, thus not fulfilling the primary condition under Rule 21 of Excise Rules 2002.

3. Appellant's Arguments:
The appellant argued that:
- The excise duty is levied on manufacture and collected on removal.
- The ownership and possession of goods cleared for export under bond remain with the appellant until the goods are delivered in an acceptable condition to the purchaser.
- The place of removal for goods cleared for export under bond is the port of shipment.
- The sale is completed only when the goods cross the customs frontier of India.
- The appellant cited several precedents from CESTAT and the Gujarat High Court supporting their position.

4. Intervener's Submission:
An intervener supported the appellant's arguments, emphasizing that remission of duty should be considered for goods destroyed before export, as the duty payable is at the port of export.

5. Respondent's Arguments:
The respondent argued that:
- The place of removal defined under section 4(3)(c) is not applicable to goods cleared for export.
- Remission of duty is available only when goods are destroyed in the factory before removal.
- Cited decisions of the Supreme Court and CESTAT to support their stance that the place of removal is the factory.

6. Tribunal's Analysis:
The Tribunal considered:
- The provisions of Rule 21 and Rule 4 of the Central Excise Rules 2002.
- The definition of 'removal' and 'place of removal' under section 4(3)(C)(iii) of the Central Excise Act 1944.
- The conditions under CIF sale contracts where ownership and risk remain with the seller until delivery at the port.
- The Tribunal noted that the place of removal for export goods is the port of shipment, and the ownership and duty liability extend up to the port.

7. Tribunal's Conclusion:
The Tribunal concluded that:
- Goods cleared for export under bond, destroyed before export, should be treated as destroyed before removal.
- The primary condition for remission of duty under Rule 21 is fulfilled in such cases.
- The recent decision of the Gujarat High Court in Commissioner v/s Dynamic Industries Ltd supports this view.

8. Final Decision:
The Tribunal held that in cases where goods removed from the factory for export under bond are destroyed before export due to unavoidable accident, the goods are to be treated as destroyed before removal in terms of Rule 21 of Central Excise Rules 2002. The reference was answered accordingly, and the case was directed to be placed before the concerned Bench for appropriate orders.

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