2014 (12) TMI 236 - AT - Central Excise

Remission of duty - Demand of duty - Loss of semi-finished goods in factory the job worker on 3-8-2004 on account of heavy rains and floods - Extended period of limitation - Held that - Appellants have sent the inputs to M/s. Alfa Drugs for conversion into semi-finished goods and such semi-finished goods, to be received by them in their factory, were to be put to further use in the manufacture of final product. The Additional Commissioner while arriving at the above finding had sought confirmation from the jurisdictional Assistant Commissioner of the appellants, who had clarified that goods to be received from job worker were semi-finished goods and they were not being entered in the RG-I register. The same were never cleared by the appellants as such from their factory. Rule 21 relates to the remission of duty liability to be paid only in respect of goods manufactured by the assessee. As such, it can be safely concluded that though the said Rules does not use the expression finished goods and simplicitor use the expression goods , the same has to be held as applicable to the finished goods only. Remission can be sought only when there is liability to pay the duty. The correspondence between the original adjudicating authority and the appellants jurisdictional Central Excise authorities clearly establish that the goods manufactured by the job worker were only semi-finished goods and the same were to be further used by the appellants in the manufacture of their final product. As such, even if the appellants would have received the said semi-finished goods from their job worker, there was no duty liability in respect of said goods and there was no question of remission of duty. The appellants have intimated the department about the loss of goods, and did not receive any advise from the department authorities for filing of formal remission application. In such a case, subsequent issuance of show cause notice raising demand cannot be upheld. - Following decision of IG Petrochemicals Ltd. v. CCE, Mumbai-VII 2001 (4) TMI 127 - CEGAT, MUMBAI - demand is hopelessly barred by limitation. Admittedly, the appellants immediately informed their jurisdictional authorities for the loss of damaged goods. As such, raising of demand in the year 2009 by invoking the extended period of limitation cannot be appreciated - Decided in favour of assessee.

Summary

Issues:
1. Whether duty liability arises when semi-finished goods are destroyed in a job worker's factory.
2. Whether the requirement of seeking remission of duty applies when goods are only semi-finished.
3. Whether the demand for duty is barred by limitation.

Analysis:

Issue 1: Duty liability for destroyed semi-finished goods
The appellants manufactured bulk and agro chemicals, sending goods to a job worker for processing. The goods got damaged in the job worker's factory due to floods. The appellants informed the authorities promptly. The Additional Commissioner ruled that as the goods were semi-finished and not cleared by the appellants, no duty liability arose. The Commissioner (Appeals) reversed this decision, leading to the present appeal.

Issue 2: Requirement of seeking remission for semi-finished goods
The Commissioner (Appeals) referenced Rule 21 without distinguishing between semi-finished and finished goods. However, the Tribunal clarified that remission under Rule 21 applies to goods liable for duty payment. The correspondence confirmed that the goods were semi-finished and intended for further processing by the appellants. Hence, no duty liability existed, and no remission application was necessary.

Issue 3: Limitation period for duty demand
The Revenue did not dispute the goods' destruction but argued the lack of a remission application. Previous cases established that failure to file a remission application does not justify a duty demand if the loss is acknowledged. The appellants promptly informed the authorities of the loss, making the demand, raised in 2009, time-barred. The Tribunal found the demand unjustified due to the limitation period.

In conclusion, the Tribunal set aside the Commissioner (Appeals)'s decision, ruling in favor of the appellants due to the absence of duty liability for semi-finished goods, the unnecessary remission application, and the demand being time-barred.