2015 (10) TMI 2206 - AT - Central Excise

Denial of remission of duty - Appellants were storing molasses in the steel tanks erected - Puncture of the drain nipple - Held that - There is no dispute about the bursting of the drain nipple attached to the storage tank and the consequent loss of molasses. The only issue required to be decided is to whether such rupture could have been avoided by the appellant or not. The drain nipple had bursted due to the high static pressure exerted on it by the stored molasses resulting in loss of the molasses. Needless to say that all accidents occur on account of lack of precautions of the personnel responsible for avoiding such incidents and nobody indulges in such accidents purposely. If such a strict measure is adopted, there would be no accident at all. It may be that the appellant were thinking of changing the nipple and before the same could be done, it led to the accident. As is famous saying Nobody invites accident. If such a restrictive construction is made applicable to the provisions of Rule 21 of CENVAT Credit Rules, the same would make the said rule inoperable and redundant. No assessee would cause loss of its own final product for the reason of not paying the excise duty. As such, I am of the view that as long as the accident is not deliberate and there is no mala fide on the part of the assessee to make the accident occur resulting in loss of the goods, the assessee would be entitled to the remission of duty in terms of the provisions of Rule 21. As such, I am of the view that the appellant is entitled to the remission of duty. - Decided in favour of assessee.

Summary

Issues:
1. Loss of molasses due to the puncturing of the drain nipple in a storage tank.
2. Rejection of remission application by the Revenue on the grounds of gross negligence.
3. Dispute regarding whether the rupture of the drain nipple could have been avoided by the appellant.
4. Interpretation of Rule 21 of CENVAT Credit Rules in the context of remission of duty.

Analysis:
1. The appellant, engaged in sugar and molasses manufacturing, faced a loss when the drain nipple of a storage tank punctured, leading to leakage of molasses. Despite efforts to control the leakage, the entire stored molasses were lost.
2. The appellant informed the Central Excise range about the loss, and the Insurance Company rejected their claim citing that corrosion of the nipple was not covered under the policy. The Revenue issued a show-cause notice proposing to reject the remission application due to alleged gross negligence.
3. The adjudicating authority rejected the remission application, attributing the loss to lack of precautions by the appellant, emphasizing that changing the nipple earlier could have prevented the accident.
4. In the appeal, the tribunal noted the uncontested loss due to the burst drain nipple and deliberated on whether the rupture could have been avoided. The tribunal highlighted that accidents often occur despite precautions and that strict interpretations hindering remission would render the rule ineffective. The tribunal ruled in favor of the appellant, emphasizing that as long as the accident was not deliberate and lacked malice, remission of duty under Rule 21 should be granted.

This judgment underscores the importance of assessing accidents in a pragmatic manner, considering the circumstances and intent of the party involved. It clarifies the application of rules in cases of unforeseen incidents and highlights the need for a balanced approach in determining liability and entitlement to remission.