2015 (10) TMI 102 - AT - Central Excise

Remission of duty - Goods destroyed in fire - Availment of CENVAT Credit - Held that - Commissioner may remit the duty payable on such goods on which duty is payable in respect of outputs of a manufacturer. Thus, I find that there is no mention of inputs under Rule 21, which are lying unused as not subjected to manufacture, thus no duty is payable. The appellant manufacturer has to pay duty only on its output when they are removed, and in case of loss in fire, which amounts to removal. The provisions of remission has been made for granting adequate relief for loss suffered, so as to give the relief to the assessee from further burden of duty. Therefore, I uphold the demand of duty in respect of raw materials and packing materials (lying in store). - So far as penalty under Section 11AC is concerned, I find that there is no deliberate intention in filing the remission late or any act or intention of evasion of duty is made out. The issue is interpretation of statute, and accordingly, penalty imposed under Section 11AC is set aside. - Decided partly in favour of assessee.

Summary

Issues:
1. Dispute over remission of duty on raw materials, packing materials, work-in-progress, and finished goods lost in a fire.
2. Interpretation of Rule 21 of Central Excise Rules, 2002 regarding remission of duty.
3. Imposition of penalty under Section 11AC for late filing of remission claim.

Analysis:

Issue 1: Dispute over remission of duty on various materials lost in fire
The appellant, a paint manufacturer, faced a fire incident resulting in loss of raw materials, work-in-progress, and finished goods. The Revenue alleged non-filing of insurance claim details and issued a show cause notice for contravention of Rule 3 of Cenvat Credit Rules, 2004. The dispute centered on the remission of duty for destroyed goods. The Commissioner (Appeals) upheld the denial of remission, citing a previous ruling. The appellant argued for remission based on previous tribunal decisions and sought relief for various materials lost in the fire.

Issue 2: Interpretation of Rule 21 for remission of duty
The Tribunal analyzed Rule 21 of Central Excise Rules, 2002 to determine the scope of remission. The rule allows remission of duty for goods lost or destroyed, subject to conditions. The Tribunal clarified that duty is payable only on manufactured outputs upon removal, not on unused inputs. Therefore, the duty remission provision aims to relieve the burden on the assessee for losses suffered. Consequently, the Tribunal upheld the duty demand for raw materials and packing materials not utilized in manufacturing.

Issue 3: Penalty imposition under Section 11AC
Regarding the penalty under Section 11AC for the delayed remission claim filing, the Tribunal found no deliberate intention or evasion of duty. The delay was attributed to an interpretation issue, leading to the penalty being set aside. The Tribunal emphasized that the penalty was unwarranted due to the lack of intent to evade duty.

In conclusion, the Tribunal partially allowed the appeal, permitting remission for work-in-progress and intermediate products while upholding duty demand for raw materials and packing materials. The penalty under Section 11AC was set aside due to the absence of deliberate evasion. The appellant was granted consequential benefits as indicated.