2016 (1) TMI 195 - AT - Central Excise

Remission of duty - Loss due to auto combustion - Held that - Oozing out is a natural phenomenon and, therefore, the case is well covered under Rule 21. The learned AR s contention that the respondent did not take sufficient precaution is not acceptable in the light of reports of Sector Officer and Range Officer as discussed above. The learned AR has not been able to show from any technical document that the respondent should have stored 10% less of the total capacity of the tank. Even assuming that this was a technical necessity, it cannot be denied that the oozing out was caused due to natural phenomena of excessive heating in the summer months. It is not the case of the Revenue that the quantity which oozed out, was used later. Neither is the case of the Revenue that the quantity in the tank which was 131472.30 quintals as verified by UP Excise authorities, did not reflect the correct quantity stored in tank No. 3. Revenue has not even verified either the quantity stored in the tank or the quantity oozed out. Revenue s appeal is simply based on the survey report of the insurance company which excluded 10% of the quantity stored while sanctioning the insured value. Even if the insurance company did not consider the quantity which had oozed out, there is no denying the fact that the same had occurred due to a natural phenomena. Therefore, no case is made out for denial of remission. - Decided against Revenue.

Issues:
- Appeal against remission of Central Excise duty on molasses lost due to auto combustion.
- Exclusion of 10% quantity by surveyor for remission.
- Contention regarding negligence of the respondent.
- Interpretation of Rule 21 of the Central Excise Rules for remission.

Analysis:
1. The appeal was filed against the remission of Central Excise duty on molasses lost due to auto combustion. The respondent, engaged in sugar manufacturing, faced a sudden rise in temperature in tank No. 3, causing auto combustion of 1,31,472.30 quintals of molasses. The Commissioner allowed remission under Rule 21 of the Central Excise Rules, leading to the revenue's appeal.

2. The main ground of appeal was the exclusion of 10% quantity by the surveyor for remission. The revenue argued that the duty on the quantity that escaped auto combustion should not be remitted. The respondent contended that the loss of 10% was a natural cause beyond their control, supported by reports from various authorities.

3. The contention regarding negligence of the respondent was raised by the Assistant Commissioner (AR) for Revenue, stating that negligence led to the molasses oozing out, justifying the duty on 10% not being remitted. However, the respondent's counsel argued that the loss was due to a natural cause, supported by reports from sector officers and other authorities.

4. The interpretation of Rule 21 of the Central Excise Rules was crucial in determining the remission. The Tribunal found that the loss of molasses due to oozing out before auto combustion was a natural phenomenon, qualifying for remission under Rule 21. The revenue's argument of negligence was dismissed, as reports confirmed the uncontrollable nature of the incident and the lack of proof of negligence or mischief.

5. The Tribunal emphasized that the revenue failed to prove that the respondent should have stored less quantity in the tank or that the oozed out quantity was used later. The appeal was dismissed, and the cross-objection by the respondent was also disposed of, affirming the remission of duty on the lost molasses due to auto combustion.

In conclusion, the Tribunal upheld the remission of Central Excise duty on the molasses lost due to auto combustion, ruling in favor of the respondent based on the natural cause of the incident and the lack of evidence supporting negligence.

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