2007 (10) TMI 84 - AT - Central Excise

Amount of relief received by assessee from Insurance cannot be considered as the Transaction value of the goods lost in fire hence C.E. duty is not liable to be paid by the assessee on that amount Section 4 CEA(Valuation) is not applicable on such remission of duty amount

Summary

Issues: Duty liability on goods lost due to fire in factory premises; Consideration of insurance claim amount as value of goods lost for duty payment.

Analysis:

Issue 1: Duty liability on goods lost due to fire
The case involved a dispute regarding the duty liability of the respondent on goods lost due to a fire in their factory premises. The respondent had filed a remission application with the jurisdictional Commissioner for the duty on the lost goods. The Commissioner, after considering the application, granted remission of duty based on the circumstances of the fire accident. It was noted that the fire was accidental, and there was no negligence on the part of the workers. The Surveyor's report indicated possible causes of the fire, such as an electric short circuit or a carelessly discarded bidi or cigarette. The Commissioner also highlighted that the goods were stored in a secured godown, and there was no evidence of negligence or lack of precautions by the company. Drawing parallels with a previous case, the Commissioner granted remission of Central Excise duty on the lost goods, leading to the withdrawal of the show cause notice issued by the revenue demanding duty on the lost quantity.

Issue 2: Consideration of insurance claim amount as value of goods lost
The revenue contended that the amount of relief received by the respondent from the insurance company should be considered as the value of the goods lost in the fire, making the Central Excise duty payable by the respondent. However, the grounds of appeal by the revenue did not cite any specific provisions of the Central Excise law to support this argument. The Tribunal observed that the insurance claim amount cannot be equated to the transaction value under Section 4 of the Central Excise Act, 1944, for the demand of duty. As a result, the Tribunal found no merit in the revenue's appeal and dismissed it.

In conclusion, the Tribunal upheld the remission of duty granted to the respondent based on the circumstances of the fire accident and the absence of negligence or lack of precautions. The Tribunal also rejected the revenue's argument of considering the insurance claim amount as the value of the lost goods for duty payment, emphasizing the lack of legal basis for such a claim. As a result, the appeal filed by the revenue was dismissed, affirming the remission of Central Excise duty on the goods lost in the fire accident.