2015 (11) TMI 595 - AT - Central Excise

Duty demand - Clandestine removal of goods - Commissioner dropped the penalty on the ground that the goods have lost in natural disaster i.e. flood and it is not the case of clandestine removal - Held that - It is not the case of clandestine removal nor any act on the part of the respondent to defraud the department with intension to evade payment of duty. The goods on which demand was confirmed has not been cleared clandestinely whereas same has been admittedly destroyed in the flood which was beyond the control of the respondent. It is kept in the mind that without any intension of the respondent they have already suffered huge loss because of natural disaster therefore it will be very unfair to ask for penalty on the respondent. In view of my above discussion, I am of the view that the orders of the Ld. Commissioner s (Appeals) are just and legal and I do not fine any infirmity therein. I therefore uphold the orders of the Commissioner (Appeals) - Decided against Revenue.

Summary

Issues:
- Imposition of penalty under Section 11AC of Central Excise Act, 1944 on the respondent for defacing finished goods destroyed in a flood.
- Consideration of loss due to natural disaster as a factor in dropping the penalty by the Commissioner (Appeals).
- Dispute over the imposition of penalty by the Revenue based on failure to inform the department about the loss due to the flood.

Analysis:

Issue 1: Imposition of Penalty under Section 11AC
The case involved two appeals by the Revenue against Orders-in-Appeal that set aside penalties imposed under Section 11AC by the Commissioner (Appeals). The appellant defaced fully manufactured goods damaged during a flood, and the scrap generated was cleared on payment of duty. The department contended that duty remission was not granted, leading to show cause notices proposing Cenvat Credit demands. The original orders confirmed duty demands, penalties, and interest. The appellant appealed, and the Commissioner refrained from deciding on the duty amount pending a Tribunal decision on remission. The Commissioner dropped the penalty, citing lack of evidence of clandestine removal and the uncontested loss due to the natural disaster.

Issue 2: Consideration of Loss Due to Natural Disaster
The Commissioner (Appeals) based the decision to drop the penalty on the fact that the goods were destroyed in a flood, not due to clandestine removal. The Commissioner emphasized that the appellant had already suffered significant losses due to the natural disaster, and without any intent to defraud the department, imposing a penalty would be unfair. The decision highlighted the absence of fraudulent intent on the part of the appellant and the lack of evidence supporting duty evasion. The Commissioner set aside the penalty imposed by the original adjudicating authority, emphasizing the impact of the flood on the appellant's operations.

Issue 3: Dispute Over Penalty Imposition
The Revenue argued that the penalty was justifiable as the respondent did not inform the department about the loss from the flood and cleared the damaged inputs as scrap without prior notification. The Revenue relied on a judgment to support the imposition of the penalty. In contrast, the respondent's counsel emphasized that the loss due to the flood was beyond the respondent's control, constituting a natural disaster widely known in Mumbai. The respondent's counsel cited judgments to support the Commissioner (Appeals)'s decision to drop the penalty based on the uncontested nature of the flood-induced loss.

In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decision to drop the penalty, considering the circumstances of the case, the impact of the natural disaster, and the absence of fraudulent intent. The judgment emphasized the importance of assessing penalties in light of uncontrollable events such as natural disasters, ensuring fairness and equity in excise duty enforcement.