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2016 (7) TMI 231 - CGOVT - Central ExciseLoss of goods during manufacturing - Procedure of Remission of duty not followed - Rule 21 of Central Excise Rules, 2002 - Cenvat Credit on inputs - On scrutiny of ER-I returns for the month of April 2009 to March2010, it has been observed that the respondent has shown some quantity of Denatured Rectified Spirit as process loss after production of the finished goods. The respondent has not mentioned any reason for this process loss in their ER-I return. Held that - Government observes that the respondent has suo moto claimed remission without fulfilling the conditions laid down under Rule 21 of Central Excise Rules, 2002 and obtaining permission from the Commissioner. - in the case of Commissioner of Customs & Central Excise Vs M/S U.P. State Sugar Corporation Ltd, the Hon ble High Court of judicature at Allahabad 2015 (5) TMI 944 - ALLAHABAD HIGH COURT has held that, if in the facts of the case, the assesse claims remission from excise duty of goods said to have been lost in natural course, within the permissible limit, as per the circulars, he has to follow the procedure prescribed under Ru/e 21 of the Rules. Only after an order is made granting remission in respect of the goods so lost due to natural circumstances, he could be exempted from payment of excise duty Remission of duty on storage losses cannot be claimed by the respondent even when no remission application has been filed by them and it is established to the satisfaction of the competent authority that such loss is due to circumstances referred to in Rule 21 ibid. - Demand confirmed - Decided in favor of revenue.
Issues Involved:
1. Process loss of Denatured Rectified Spirit and its excisability. 2. Compliance with Rule 21 of Central Excise Rules, 2002 regarding remission of duty. 3. Allegation of clandestine removal of goods. 4. Validity of the Order-in-Appeal setting aside the Order-in-Original. Issue-wise Detailed Analysis: 1. Process loss of Denatured Rectified Spirit and its excisability: The respondent, engaged in manufacturing excisable goods, reported process loss of Denatured Rectified Spirit in their ER-I returns without providing any reason. As per Section 3 of the Central Excise Act, 1944, excise duty is leviable on all goods manufactured in a factory unless remission is claimed under Rule 21 of the Central Excise Rules, 2002. The respondent neither provided reasons for the loss nor applied for remission, leading to the presumption that the goods were removed without payment of duty. 2. Compliance with Rule 21 of Central Excise Rules, 2002 regarding remission of duty: Rule 21 allows remission of duty if goods are lost or destroyed by natural causes or unavoidable accidents, provided the manufacturer applies for remission and satisfies the Commissioner. The respondent failed to apply for remission or provide evidence for the loss, thus violating Rule 21. The Assistant Commissioner confirmed the demand of Rs. 10,092 in excise duty and imposed a penalty, which the Commissioner (Appeals) later set aside. 3. Allegation of clandestine removal of goods: The show cause notice alleged that the respondent clandestinely cleared 6137.9 liters of Denatured Rectified Spirit, showing it as process loss to evade duty. The Commissioner (Appeals) found no evidence of clandestine removal, noting the reported losses were below 0.5% and attributed to natural causes like evaporation. The respondent argued that the volatile nature of the product and physical control by State Excise Officers made clandestine removal impossible. 4. Validity of the Order-in-Appeal setting aside the Order-in-Original: The Commissioner (Appeals) relied on precedents and found no proof of clandestine removal, setting aside the Order-in-Original. However, the Central Government observed that the remission procedure under Rule 21 was not followed by the respondent. The Government cited the Allahabad High Court's judgment, emphasizing the necessity of following Rule 21 for remission claims. The decisions cited by the respondent were deemed inapplicable due to differing facts and circumstances. Conclusion: The Central Government concluded that the Commissioner (Appeals) erred in setting aside the Order-in-Original. The remission of duty on storage losses cannot be claimed without following the procedure under Rule 21 and obtaining the Commissioner's permission. The Order-in-Original was upheld, and the Order-in-Appeal was set aside, allowing the Revision Application. Final Order: The Revision Application is allowed, and the Order-in-Appeal is set aside, upholding the Order-in-Original.
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