2017 (3) TMI 1121 - AT - Customs

100% EOU - remission of duty - denial on the ground that the appellant has failed to take steps to safeguard the capital goods, and materials procured without payment of duty for use in the 100% EOU - demand of duty on inputs, finished goods and capital goods destroyed - Held that - the District Fire Officer, Pithampur, has certified, vide his certificate dated 13.03.2010 that adequate firefighting equipment and provisions of sufficient water was available with the appellant and sufficient efforts were made to put off the fire by the company. Accordingly, the fire department has certified that there is no foul play and that the fire has due to reasons beyond the control of the appellants. This establishes the fact that the fire was nothing but an unfortunate accident - reliance was placed in the case of Sumit Chemicals Pvt. Ltd. Vs. Commissioner of C. Ex., Kanpur 2015 (12) TMI 1594 - CESTAT ALLAHABAD - this is a fit case for grant of remission under both Central Excise as well as Custom provisions. Once remission is granted for Excise and Customs duties in respect of goods destroyed in the fire accident, there will be no justification for the demands made in the impugned order. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Recovery of Central Excise duty on goods procured duty-free from local sources.
2. Recovery of Customs duty on goods imported duty-free.
3. Disallowance of Cenvat credit on inputs/capital goods.

Analysis:
1. The appellant, a 100% EOU, faced a fire accident resulting in significant loss of capital goods, raw materials, finished goods, etc. The Commissioner issued a Show Cause Notice proposing recovery of Central Excise duty on goods procured duty-free locally and Customs duty on imported goods. The impugned order confirmed these demands due to the appellant's alleged failure to safeguard the goods procured without duty payment. The appellant contended that the fire was an accident, and remission of duty should be granted under Rule 21 of Central Excise Rules and Section 23 of Customs Act, 1962.

2. The Commissioner rejected the appellant's claim for remission, citing negligence in storing final products and non-compliance with safety procedures. Consequently, demands were confirmed for Central Excise duty on indigenous goods, Customs duty on imported goods, and disallowance of Cenvat credit on destroyed inputs. Penalties were imposed under relevant rules. The appellant argued that the fire was beyond their control, and remission should be granted based on legal provisions.

3. The Tribunal analyzed the fire incident, noting the certification by the District Fire Officer confirming the accident and lack of foul play. Relying on case laws like Sumit Chemicals Pvt. Ltd. and Commissioner of Cus., Bangalore, the Tribunal emphasized that remission is granted for goods lost due to natural causes or accidents. Referring to M/s Joy Foam Pvt. Ltd. and M/s Next Fashion Creators Pvt. Ltd. cases, the Tribunal held that the appellant, being a 100% EOU, was entitled to remission under Central Excise and Customs provisions. Consequently, the impugned order was set aside, and the appeal allowed, granting remission for goods destroyed in the fire accident.

In conclusion, the Tribunal granted remission of duties under Central Excise and Customs provisions due to the fire accident, emphasizing the legal entitlement of the appellant as a 100% EOU. The decision was based on established case laws and the certification of the fire incident as an unfortunate accident beyond the appellant's control.