2016 (3) TMI 126 - AT - Central Excise

Remission of duty - loss of molasses - whether such rupture could have been avoided by the appellant or not - Held that - 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, 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, the appellant is entitled to the remission of duty. - Decided in favour of assessee

Summary

Issues:
Claim for remission of duty due to loss of molasses stored in a tank due to the bursting of the drain nipple.

Analysis:
The appellant, engaged in sugar and molasses manufacture, faced a significant loss when the drain nipple of a storage tank burst, causing leakage of 2226.00 MTs of molasses due to high static pressure. Despite efforts to control the leakage, the molasses were lost. The appellant promptly informed the Central Excise range about the loss. The Superintendent verified the loss and recorded statements, noting that the accident occurred beyond the appellant's control. The appellant also notified their insurance company, but the claim was rejected due to the corrosion of the nipple not being covered under the Insurance Policy.

The appellant sought remission of duty amounting to &8377; 17,19,585 for the lost molasses. However, a show-cause notice was issued proposing to reject the remission application based on alleged gross negligence. During adjudication, the appellant argued that the rupture was due to static pressure, supported by the Insurance Company's Surveyor's report. The Insurance Company's rejection was not due to negligence but the lack of coverage for nipple corrosion. The appellant cited Tribunal decisions supporting remission for lost goods.

The adjudicating authority rejected the remission, citing the Insurance Company's claim denial and the belief that changing the nipple in time could have prevented the accident, indicating lack of precautions by the appellant. The appeal contested this decision. The Tribunal noted the undisputed loss due to the nipple bursting and emphasized accidents often occur despite precautions. Applying a strict standard would render the rule inoperable, as no entity would cause loss intentionally to avoid duty payment. As long as accidents are not deliberate or malicious, remission should be granted. Consequently, the impugned order was set aside, and the appeal allowed with consequential relief.