2019 (1) TMI 1892 - AT - Central Excise

Remission of duty - goods that were claimed to have been lost/damaged by flood - rejection on the ground of lack of documentary evidence in the form of excise records and with the finding that the estimation of surveyor is not an acceptable substitute - HELD THAT - It would appear, from a perusal of the impugned order, that the competent authority has proceeded to dispose of the claim as a claim for refund would have been. The principle of remission enshrined in Rule 21 of Central Excise Rules, 2002 is an acknowledgement of duty liability that crystalizes on completion of the manufacturing process but, nonetheless, not recoverable because there is no removal. We see no purpose in a fresh ascertainment from non-available records when the sanction of insurance claim, establishing loss of the goods, sufficed for exercise of discretion by the competent authority. In any case, for reasons explained ibid, there is no revenue implication. Rule 21 of Central Excise Rules, 2002 is unambiguously clear that it is for the Commissioner of Central Excise to come to conclusion, based on his satisfaction and from the evidence of damage, about the extent to which the claim should be allowed. The impugned order has failed to do so. The damage that was effected by the floods is evident from the several records including complaint with the police authorities and the processing of the insurance claim. In the circumstances, the satisfaction mandated in Rule 21 of Central Excise Rules, 2002 cannot be discountenanced. The original authority has failed to appreciate the circumstances in which the claim was filed and that the remission was sought on value less than the amount compensated by the insurer. That should suffice for acceptance of the claim of value of the goods that were unsalvageable. The claim of remission admitted - appeal allowed - decided in favor of appellant.

Summary

Issues:
Rejection of application for remission of duty of central excise due to lack of documentary evidence and failure to reverse Cenvat credit.

Analysis:
The appeal involved the rejection of an application by M/s. Borax Morality Ltd. for remission of duty of central excise amounting to ?5,52,989 on goods claimed to have been lost/damaged by flood. The rejection was based on the lack of documentary evidence, specifically excise records, and the finding that the surveyor's estimation was not acceptable. Additionally, the failure to reverse Cenvat credit was cited as disqualifying the claim for remission. The rejection also highlighted that the claim in excess of ?19.59 lakhs, representing duty on goods lost during reprocessing, was inadmissible.

The Tribunal noted that the incident leading to the claim occurred during floods in 2005, where goods and records were destroyed. The rejection of the application without following up with a demand under Section 11A of the Central Excise Act rendered the claim infructuous. The denial of the application was questioned concerning the insistence on producing unavailable records long after the incident. The Tribunal found the rejection unjustified as the insurance claim, based on the surveyor's report, should have sufficed for the remission claim.

Regarding the non-reversal of Cenvat credit, it was clarified that the circular from the Central Board of Excise & Customs could not compel reversal without corresponding provisions in the Rules. The Tribunal emphasized that the satisfaction of the Commissioner of Central Excise, based on evidence of damage, should determine the extent of the remission claim. The original authority's failure to appreciate the circumstances of the claim and the value compensated by the insurer led to the appeal being allowed by accepting the remission claim.

In conclusion, the Tribunal allowed the appeal by accepting the claim for remission, highlighting the importance of evidence, procedural compliance, and the satisfaction of the competent authority in determining duty liability and remission claims under the Central Excise Rules.