2008 (7) TMI 130 - AT - Central Excise

Goods became unfit for consumption/marketing due to riot took places in factory remission of duty claimed - Commissioner finding that the assessee had been negligent in safeguarding its finished products is not reasonable as the assessee s stake in the excisable goods was much higher than the stake of the revenue - finding of the Commissioner that the assessee did not foresee the probability of damage to its finished goods is a finding without any basis remission of duty not deniable

Summary

Issues involved:
Claim for remission of duty on damaged goods, imposition of penalty under Rule 173Q.

Analysis:
The appeal was filed by M/s. Indo Swiss Jewels Ltd. (ISJL) challenging the rejection of their claim for remission of duty amount of Rs. 3,53,020/- on goods damaged during a riot. The Commissioner imposed a penalty of Rs. One lakh under Rule 173Q on the appellants. ISJL sought remission of duty on damaged goods due to a riot that occurred in their factory. The Commissioner found that despite continuous labor unrest and violent incidents, the assessee did not take sufficient precautions to prevent damage to the excisable goods in the factory. The Commissioner concluded that the damage to the goods was not due to an unavoidable accident and could have been avoided. Additionally, the Commissioner noted that the damage was not reported to the department for more than five years, hindering verification of the claim's legitimacy.

The appellant's counsel argued that the impugned goods were genuinely damaged and unmarketable, supported by a report from the Assistant Commissioner confirming the damage. The counsel highlighted that the Insurance Company denied their claim, but it was later awarded by the National Consumer Disputes Redressal Commission, strengthening the legitimacy of the damage claim. The Assistant Commissioner recommended remission of duty amounting to Rs. 3,53,020/- as the goods were unfit for marketing. The counsel contended that the rejection of remission by the Commissioner was an inappropriate exercise of discretion.

The Senior Departmental Representative (SDR) contended that the delay in reporting the damage cast doubt on the genuineness of the claim. The SDR argued that the assessee failed to take reasonable precautions to prevent the damage, emphasizing the responsibility to safeguard manufactured goods. The SDR defended the Commissioner's order and opposed the remission of duty.

The Member (T) analyzed the relevant Central Excise Rules, emphasizing that duty need not be paid on goods claimed as unfit for consumption or marketing. Considering the Assistant Commissioner's report and the condition of the goods, the Member deemed it improper for the Commissioner to deny remission on damaged goods claimed by the assessee as unfit for marketing. The Member criticized the Commissioner's findings of negligence by the assessee and the imposition of a penalty under Rule 173Q, ultimately setting aside the impugned order and allowing the appeal. The destroyed goods were to be remitted as requested by the appellant's counsel.