2017 (6) TMI 761 - AT - Central Excise

Goods destroyed by fire - demand of duty on the finished goods destroyed in the fire, and in respect of which the appellants had received the insurance compensation - remission of duty - Held that - In the absence of any dispute that there was damage and loss of the finished products or in the absence of any dispute of the fact that the appellants have paid back the CENVAT credit availed on the inputs and have paid duty in respect of salvaged waste and scrap, confirmation of demand of duty on the lost final products cannot be upheld. Filing of a remission application is only a procedural aspect and the prayer to remit the duty can be made by an assessee even while defending himself in the demand proceedings. Extended period of limitation - Held that - the entire facts were in the knowledge of the Revenue. The reasoning of Commissioner (Appeals) that the appellant had not given the estimate of the goods lost in the fire cannot be equated with any suppression or mis-statement with malafide intention so as to justifiably invoke the larger period of limitation - demand beyond normal period not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability for duty on finished goods destroyed in a fire
2. Application of remission under Rule 21 of Central Excise Rules, 2002
3. Limitation period for raising demand

Issue 1: Liability for duty on finished goods destroyed in a fire
The appellant, engaged in manufacturing water heaters, faced a fire incident resulting in the destruction of goods. Despite informing the authorities and providing necessary details, a show cause notice was issued proposing duty payment on the destroyed finished goods. The original authority confirmed the demand, but the appellate authority reduced it. The Tribunal noted the liability under Section 3 of the Central Excise Act, emphasizing that duty payment is required when goods are fully manufactured. The Tribunal also highlighted that the denial of remission solely for not filing an application was unjustified, citing precedents where remission applications were considered procedural and not a basis for denying relief. As the appellant had paid duty on salvaged goods and reversed Cenvat credit, the demand on lost goods was deemed unsustainable.

Issue 2: Application of remission under Rule 21 of Central Excise Rules, 2002
The Tribunal emphasized that the failure to file a remission application did not warrant denial of duty remission. Citing previous cases, it clarified that the absence of a formal application should not preclude consideration of remission during demand proceedings. The Tribunal stressed that the remission process is procedural and can be raised by the assessee during defense against a demand. As the appellant had informed the authorities about the loss and taken necessary steps, the demand for duty on lost goods without considering remission was deemed unjustified.

Issue 3: Limitation period for raising demand
The Tribunal found that the demand raised invoking a larger period of limitation was unsustainable. Despite the lack of an estimate of goods lost in the fire, the Tribunal noted that the fire incident was promptly reported to the Revenue, leading to extensive correspondence. The Tribunal concluded that the Revenue was aware of all relevant facts, and the absence of detailed estimates did not amount to suppression or misstatement with malicious intent to justify invoking an extended limitation period. Consequently, the demand beyond the normal limitation period was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeal in favor of the appellant.