2015 (11) TMI 661 - AT - Central Excise

Remission of duty - Original Authority rejected the remission application on the ground that the appellant did not take proper care to prevent the fire. - Held that - Appellant kept the final product in open space and exhibited casual approach in dealing with the goods. Prescribed procedure for highly inflammable product has not been followed to avoid such fire accident. Sufficient fire fighting equipment were not put to service. Only fire brigade was informed who put out the fire later. The learned Commissioner rejected the remission claim on this ground and consequently confirmed the demand for excise duty on the product destroyed in fire. We find that the reason for rejection of remission and consequently confirmation of demand is not legally tenable. It is to be noticed that the appellants have lost substantial quantity of finished goods worth crores of rupees and the duty portion of the said loss is only a small part. It is nobody case that the fire accident benefited the appellant by way of remission of duty. It is also nobody case that as the owner of the goods, the appellant, are not inclined to take expeditious action to avoid or reduce the damage of their property. - even the swift action immediately after noticing fire could not have prevented some damage to the final product. Further, we find the Original Authority has confirmed the demand of excise duty on the said destroyed final products. Though the excise liability arises at the time of manufacture the payment of duty is at the time of clearance. There could be no clearance of destroyed products. As the destruction has been an admitted fact there could be no duty liability on the goods which are not cleared. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Remission claim rejection based on failure to prevent fire accident and violation of natural justice principles.

Analysis:
The case involved the appellants engaged in P.U. Foam manufacturing, seeking remission of excise duty due to a fire accident destroying finished goods and inputs. The fire was attributed to an electrical short circuit, leading to a claim of over &8377; 65 lakhs. The Commissioner rejected the remission claim, prompting the appeal. The appellants contended that no show cause notice was issued, violating natural justice, and argued that Rule 21 of Central Excise Rules applied as the goods were lost in an unavoidable accident. They cited several case laws to support their position.

During the appeal, the appellants emphasized the applicability of Rule 21 to their case, highlighting the sudden fire accident involving highly inflammable materials. The Original Authority's rejection was based on the appellants' alleged failure to prevent the fire, not following prescribed procedures for inflammable products, and inadequate fire safety measures. However, the Tribunal found the rejection unjustified. Despite the substantial loss of goods, the duty portion was relatively small, and the fire did not benefit the appellants. The Tribunal noted that as the goods were destroyed and not cleared, no duty liability should apply. Therefore, the Original Authority's reasoning was deemed unsustainable, leading to the appeal's success and setting aside of the impugned order.

In conclusion, the Tribunal overturned the Commissioner's decision, emphasizing the lack of legal basis for rejecting the remission claim and confirming the duty demand. The Tribunal found the Original Authority's reasoning flawed, as the destruction of goods precluded duty liability. The appeal was allowed, providing consequential relief to the appellants.